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(From Financial Literacy Blog) – Between working, spending time with your friends and family, and pursuing your hobbies, there never seems to be enough time in the day. As a result, we all are looking for ways to cut the amount of time spent on mundane chores. Setting up automatic payments for recurring bills is a modern convenience that saves a significant amount of time. As long as you have the funds in your account, you’ll simply be able to set it and forget it, right? Yes—you could, but here are a few reasons why you should monitor your automatic payments:
Overdraft Fees
When making manual bill payments, you can always check to ensure you have sufficient funds in your account before you pay. When you enroll in auto-pay, there’s a greater risk of overdrafting your account, as you probably won’t be logging into online or mobile banking to check your balance before each payment. While truly being able to set it and forget it would be great, it’s a good idea to continue checking in on your accounts before your automatic payments clear each month. This is especially crucial if you’ve automated any variable expenses. While you can expect your Netflix bill to remain the same month-to-month, the same can’t be said about your electric bill. If a variable expense ends up being much more costly than anticipated, having an automatic payment post before you check your account could cause you to overdraft. Try to get in the habit of checking your account balance before your auto-pay clears. While it’s not exactly a “set it and forget it” approach, it’s still more convenient that manually paying your bills each month.
Unnoticed Errors
There are a number of benefits to enrolling in auto-pay. It’s convenient, you’re less likely to miss a payment, and you can even qualify for lower interest rates on certain loans if you opt in. A major downside, however, is actually something out of your control. Service providers and lenders do occasionally make mistakes. While rare, these mistakes could be costly. Your phone company could accidentally withdraw your monthly payment twice or your internet provider could add an extra zero on your bill by mistake. If you aren’t monitoring your automatic payments, a costly mistake could go unnoticed. If it goes unnoticed for too long, you may not even be able to dispute the incorrect payment.
Cancelled Services
If you’ve enrolled in auto-pay and had only positive experiences, you might simply let your automatic ACH or Bill Pay services take care of everything. However, your auto-pay service doesn’t know when you’ve stopped going to the gym or deleted the Hulu app from your smart TV. If you’re letting your auto-pay take care of everything, you may find yourself wasting money on subscriptions you’re not using. Instead, simply check in on your account statements each month to ensure that you aren’t throwing your hard-earned money away.
The benefits of automatic payments make opting in an attractive option—despite any drawbacks. If you decide to sign up for auto-pay, reach out to your local credit union about setting up eAlerts. Your credit union will email, text, or even send you a push notification when your balance is low, when a bill is due, and/or when a transaction has occurred. It’s a great way to stay on top of your payments without having to manually make them yourself. Auto pay is incredibly convenient and is a payment process that is certainly worth looking into, but it’s important to have good financial habits rooted in an awareness of what you’re paying and when.