Beware of Automatic Payments

auto paymentI love that I can pay bills over the Internet. I cannot remember the last time I wrote a check to pay a monthly bill. Many of these payments are made automatically, with an email to tell me that they are billing my bank or credit card account. Utilities try hard to get you to sign up for auto payments. It is obviously to their advantage to get most of their customers to sign up for auto payment. They can then count on receiving payment on time and avoid having to hound customers for fees owed. It is not always to the consumer’s  advantage to sign up for auto payment, though.

From a customer’s perspective, the advantages for auto payment are

  • You will never be late to pay a bill.
  • Effortless bill payment. You don’t have to think about making a payment, which is what the utilities want. It is a case of out-of-sight, out-of-mind. Since you don’t see the payments, you don’t think about them, and are inclined to just let them continue.

Some disadvantages are

  • You have to cancel auto pay if you discontinue the service. This bit me after changing our automobile insurance from one vendor to another for reduced fees. I thought our agent would cancel the old insurance, but he didn’t. We were thus billed by two insurance companies at the same time. Once I realized what had happened, I made sure to cancel the old insurance and then had to fight to get the payment refunded. I eventually got the refund, but I would have never had this problem if I had not signed up for automatic payment.
  • It is difficult to contest a bill after the payment has been made.
  • It is all too easy to just let the bill and service ride, even when you no longer have a need for the service.

Services that I have on auto pay are utilities that we need and are not likely to ever change, such as water and power. I would put trash pickup on auto pay if I could. Our mortgage used to be on auto-pay until it was paid off. Netflix is also on auto-pay using one of our credit cards because that’s the only way it works.

One auto-pay service that I recently stopped was a pest control company. They came by every other month, spent about 15 minutes spraying citrus oil, and then charged our credit card $85. I hired them when we had a carpenter ant infestation, but now there is no need for bimonthly sprayings.

Bills that are not on auto pay are Internet, phone, television, insurance (car, home, and umbrella), and credit card payments. In all these cases, I want to check the bill prior to making any payment.


6 thoughts on “Beware of Automatic Payments

  1. A manager at the credit union I use once suggested that customers should NEVER sign up for an autopay arrangement that originates from the creditor’s end, because it’s often difficult, even for the bank or CU, to make these stop. That credit union — and I assume most banks, since my CU is usually behind the curve, technologically — make it possible for customers to set up autopay or manual payments from their end. I go to the automatic payment function and ask the CU to send XX dollars/month to, say, Metlife for long-term care insurance. But because the request originates from me, I can easily change or cancel that automatic payment, with no permission or argument from Metlife.

    The same manager reported that insurance companies are especially egregious in this respect — in some cases, he said, it was next to impossible to cancel payments.

    In these parts, the utility companies send snail-mail statements about three weeks before automatic payments are deducted from customers’ accounts, so it’s easy to check those. Payments to utilities are the least problematic of these arrangements.

    1. @Funny, Thanks for your comment. I agree that pushing the payments to the vendors is usually much better than giving them the rights to pull the payments from your account. That said, I am not too worried about the utility companies (water and power) having the ability to pull their payments. I always get an email from them saying they are going to pull $xx from my account on such-and-such a date. As I mentioned in the post, I learned the hard way not to allow insurance companies to pull payments.
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  2. I also learned the hard way never to allow anyone access to my bank accounts – had to actually close a checking account to stop payments which were no longer authorized. Now I use my online bill pay, as Funny does, to set up automatic payments that I control and the credit union sends out for me. The one exception is my mortgage payment, because I don’t *ever* want to risk that one being late or skipped.

    There’s another reason I don’t like vendor-controlled payments. One day my computer crashed and for at least a month, until I could buy another, I didn’t know what was due or when because I no longer received bills. Now I make sure all the bills arrive in paper form, so I can check them before the payments go out.

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