4 Reasons Autopay Is Bad for Your Financial Health

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While autopay can save you time, it can also cost you money. A set-it-and-forget-it approach to paying your bills might sound like a win for your financial health, but autopay comes with a fair share of risks. When used wisely, autopay can save you time and prevent issues like late fees, but it can also cause you to be too lax with your bills.

That’s not to say you should never use autopay, but you have to consider your financial position and habits. For example, if you’re living paycheck to paycheck, using autopay could cause you to overdraft if you forget about an upcoming withdrawal. 

Whether it’s for credit card payments, utilities, streaming subscriptions, etc., consider the following ways that autopay could potentially be bad for your financial health.

1. You Could Lose Track of Your Spending

One problem with autopay is that it creates an out of sight, out of mind dynamic. There’s a reason why so many services charge a monthly subscription. If you had to pull out your credit card or put in your bank details for every purchase, you might think twice about whether you really want to go through with it. Yet when a bill gets charged automatically, you might keep racking up expenses without giving them much thought.

Consider that around 8% of customers cancel subscriptions when actively asked to renew, compared to the approximate 2% who cancel their subscriptions in other months, according to an NPR.

The same dynamic can happen with autopay. Even if autopay doesn’t cause you to overdraft, you might not realize how much you’re spending or just see the headline amount, rather than reviewing specific charges.

2. You Could Rack Up Interest Fees

With credit card bills, autopay can be particularly risky if you set an automatic payment for less than your full statement balance. Paying a little bit more than the minimum on autopay might seem like a good way to pay off debt, but if you’re not actively looking at these payments, you might not realize how much you’re still incurring in interest fees along the way. If you had more visibility, you might decide to pay off your card faster, or even pay the full balance.

Yet on average, autopay for credit cards drops the average balance payment by $25-$48, according to a study by Jialan Wang from the University of Illinois at Urbana-Champaign and National Bureau of Economic Research (NBER). If you’re not careful, that could mean paying more in interest over the long run.

3. You Could Miss Fraud/Billing Errors

Another risk with autopay is that you get so used to these charges happening automatically that you don’t think to scrutinize them. That could lead to issues like missed fraud or billing errors. For example, if your credit card is set to autopay, you might not review your transactions and could miss a fraudulent charge. Or, a subscription service might have charged you twice due to a billing error, and you might not have been looking at your statements closely enough to realize that. 

4. You Could Miss Savings Opportunities

Lastly, autopay could cause you to miss out on opportunities to save money.

For example, your cell phone service provider might have changed their pricing tiers but kept your old pricing on autopay. Or, maybe you’ve gotten used to autopay on your car loan every month; yet changing interest rates or an improvement to your credit score may give you an opportunity to refinance and lower your monthly payment.

However, if you strictly used autopay and never checked your accounts or give them much thought, you might miss these types of opportunities.

Overall, autopay can be a convenient feature, but it can also cause you to take your eye off the ball. You might miss issues like overspending, interest charges, fraud, billing errors and other opportunities to save money. Even if autopay is required, such as for a subscription service, consider still logging into your account periodically to reduce the odds that these types of issues happen to you. 

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