Be Careful With Autopay — It Could Raise Your Bills by $133 per Month
Putting all of your subscriptions and bills on autopay is a convenient way to ensure you never miss a payment — but it can also mean you lose track of how much you are paying for these monthly expenses. A recent survey conducted by C+R Research found that the average consumer estimated that they spent $86 on subscriptions every month, when in reality, the average respondent spent $219. That means that on average, consumers underestimated their monthly spending on subscriptions by $133, and are actually paying 2.5 times their original estimate.
Autopay is a major culprit in this underestimation, as most consumers report putting their subscriptions on autopay — 72% said they have all of their monthly subscriptions on autopay, and 14% said they have some of their monthly subscriptions on autopay. This is despite the fact that consumers admit that putting subscriptions and bills on autopay makes them more likely to forget that they are being charged for this expense — 74% of consumers said it was easy to forget about their recurring monthly subscription service charges, and 42% said that they’ve stopped using a subscription service(s) but forgot they were still paying for the service.
So, does this mean autopay is a bad thing? GOBankingRates spoke to financial experts to get their insights.
Autopay Can Be Beneficial When Used Responsibly
Before putting a bill on autopay, make sure that it fits into your monthly budget.
“There is a difference between putting a bill on autopay and ignoring it,” said Jay Zigmont, Ph.D., CFP, founder of Childfree Wealth. “Autopay is a valuable tool when you use it with your budget. For example, my monthly mortgage comes out biweekly automatically. For me, it means I don’t have to worry about my mortgage being paid and I make sure that my direct deposit covers it.”
One major advantage of using autopay is that it ensures you never miss a payment.
“The ultimate pro for autopay is automating a task and not needing to manually remember to pay,” said Courtney Mitchell, head of consumer deposit products at TD Bank. “In today’s busy world, automation is our friend when it comes to executing and not forgetting — not to mention the positive effect promptly paying bills can have on your overall credit score.”
Using autopay can also save you time, and sometimes money.
“The most significant benefit of autopay is certainly time savings,” said Levon Galstyan, a certified public accountant at Oak View Law Group. “Your bills will be paid without you having to put in any time or effort; you don’t need to sit down and do it. [As an additional benefit], some businesses reward customers who sign up for their autopay services with rebates. They may be prepared to offer a minor reward because it guarantees they will be paid on time.”
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The Downsides of Using Autopay
As demonstrated by the C+R Research survey, one of the major disadvantages of using autopay to pay for monthly bills such as your mobile phone, internet, streaming services and subscriptions is that it’s easy to lose track of how much you are actually spending. Plus, it’s easy to forget about subscriptions you’re no longer using.
“It is simple to set up autopay for subscriptions to newspapers, cable TV plans, satellite radio, fitness club memberships and other services, but then forget to cancel your subscription when you no longer need them,” Galstyan said. “Money can be wasted as a result of this.”
You may also not realize if you are being overcharged for a service.
“Your creditor may unintentionally charge you twice or withdraw the incorrect amount,” Galstyan said. “You risk missing an improper charge if you don’t frequently check your account.”
Since these payments are deducted automatically, you also run the risk of an overdraft.
“You risk forgetting about a hefty forthcoming payment and overdrawing your account if you don’t carefully monitor how much money you spend each month, and ensure there is enough in your account to handle your automated payments,” Galstyan said.
The Bottom Line
If you do use autopay, make sure you are taking the necessary steps to avoid any of the potential downsides.
“Although automatic payments have some significant benefits, there is also some danger involved,” Galstyan said. “Consider setting up a series of notifications and reminders to keep yourself updated on the money leaving your account. Also, make sure you check your balances and expenses frequently.”
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