When setting up your various accounts for your expenses, you’ve likely placed many of these recurring costs on the autopay feature so that you have one less thing to think about. Money management can be time-consuming and it makes sense to simplify the process through automation. Unfortunately, autopay could cost you more money in the long run.
In this article, we will review how autopay may be costing you more and how to avoid it.
How Can Autopay Actually Cost You More?
Here are the different ways autopay can cost you more…
You Forget About Free Trials
“Signing up for a free trial of a paid membership program, subscription service, app and so on requires consumers to enter a credit card and will auto enroll and charge the card on file if you don’t cancel before the complimentary period is up,” said Andrea Woroch, consumer and money-saving expert at Andrea Woroch.
Putting that free trial on autopay could lead to you forgetting about it when the renewal time comes. While automation helps with services that you use regularly, it could hurt you financially if you end up paying for subscriptions you don’t need.
You Forget About Subscriptions
It’s easy to forget about a service or subscription that gets billed quarterly or annually when it’s set to autopay. You may end up paying for a service that you haven’t used in months. This happens to many people when it comes to gym memberships or other subscriptions that they pay for annually. You may have lost interest in something or have decided that it doesn’t offer you any value at this point in your life.
You Don’t Review Your Account Balance
“Those who pay credit cards with autopay may also get a bit lazy with checking their accounts since they don’t have to log in to pay their bill,” Woroch said.
While you may want to reduce the amount of time you spend on your personal banking, you still want to manually review your accounts to ensure that your spending is within reason. Subscriptions and services can quickly add up and cut into your budget.
You Miss Fraudulent Activity
When you automate your bills, you could miss potential fraudulent activity on your accounts. You may also end up paying more for a service due to a billing mistake that you missed. For example, your cell phone or internet package could end up charging you for services you never used due to an administrative error. If you don’t spot this, it could be difficult to reverse the charges months later.
You Could Go Into Overdraft
“Setting up autopay for services that charge an unpredictable amount, such as your energy bill or credit card bill, can also lead to overspending in the event you overdraft your bank account thanks to overdraft fees,” Woroch said. “You’re better off setting up autopay for the minimum due on your credit card rather than the full balance to avoid this.”
If an autopay subscription costs more than normal, you could go into overdraft and be hit with unexpected banking fees. These unnecessary fees could sting if they hit at a stressful time or if you’re in between paychecks.
How Can You Ensure You Don’t Overpay?
There are a few proactive measures that will help ensure you don’t overpay with autopay.
Step 1: Set a Reminder for Free Trials
“Set a calendar reminder a couple of days before a free trial is up to give you time to cancel in the event you don’t like or think you will use a service so you don’t get auto-enrolled and auto-charged,” Woroch said.
You want to track all free trials and subscriptions to ensure you don’t end up paying for any services you don’t use anymore. There’s nothing worse than getting stuck with a bill for something that you don’t even use.
Step 2: Have Alerts for Your Bills
“Set alerts and reminders to check bills before autopay charges go through to ensure you have enough cash in the bank to cover the payment,” Woroch said.
You’ll also want to review your account charges to ensure everything is accurate and spot any potential fraud. You still want to review your manual bills to ensure that everything makes sense. For example, you don’t want to overpay for your utilities due to a billing issue or discover that you exceeded your allotted data amount once it’s too late.
Step 3: Review Your Credit Card Often
Woroch suggested getting in the habit of checking your credit card statement at least once a week. This will force you to be more accountable for your spending and help you avoid unnecessary purchases. You also want to stay on top of your finances to ensure you’re not overspending in certain areas.
Closing Thoughts
“Paying attention to your spending activity and looking at your credit card bill regularly is key to managing your money! Seeing the charges stack up on your account will hold you more accountable and make you rethink unnecessary purchases,” Woroch said.
It’s easy to forget about expenses when you’re paying with a credit card or any kind of digital wallet. As convenient as autopay can be, you still want to manually review your expenses so you don’t get carried away with your spending.
More From GOBankingRates
Source link