Autopay is a way to automatically pay bills on time every month without needing to remember to do it yourself. The problem is that autopay can cost you money in the long run if you’re not careful. Here are the five bills that can cause the biggest headaches if put on autopay.
1. Credit card payments
If your credit card bill is the same every month, you can skip this step. However, for many of us, our credit card bills change every month, and having credit cards set up for autopay can create a slippery slope that leads to debt.
The problem with auto-paying your credit cards is two-fold. First, you’ll need to ensure that your bank account has enough to cover paying off your dynamic balance in full every month. Otherwise, you could have your payment bounce and be hit with overdraft fees from both the bank and your creditor.
Secondly, if you’re not actively monitoring your credit card usage, you could end up further in debt than expected. If you’re using something like this debt avalanche calculator to dig yourself out of debt, then you know just how easy it can be to fall into spending habits that hurt your financial health. Maintaining a habit of actively monitoring your credit card use will help keep you from spending too much and help you determine in what categories you tend to overspend.
2. Annual subscriptions
The biggest issue with putting annual subscriptions on autopay is that we tend to forget when they’re due or that we’re paying them at all. Unfortunately, many apps and services are counting on this and will rarely offer refunds of annual subscriptions once they’re paid. If you still want to use autopay for something you pay yearly, put a reminder in your calendar one week in advance of your auto-renew date so you can decide whether or not to keep your subscription.
3. Gym memberships
Everyone starts a gym membership with the best of intentions, but many of us end up falling back into our old habits and avoiding the gym altogether. Suddenly, we’re spending money every month on a membership we don’t use and cannot get out of easily. While you may get a cheaper plan by setting up a contract that’s paid automatically, that monthly plan costs you money every month it’s not used, canceling out any “savings” you might’ve been told you got.
4. Cable or streaming services
Cable and streaming services are notorious for raising their monthly fees without giving their customers more than a month’s notice. If you spend money on extras every month like one-time rentals or special events, then like credit cards, it can be a slippery slope where you’re spending way more than your budget allows. By keeping your TV bills on manual pay, you’re able to better understand what you’re paying for and ensure it’s still worth the cost.
5. Non-prepaid cell phone bills
If you have an unlimited or prepaid plan, then autopay isn’t a bad feature to use. The trouble comes with dynamic rate plans that charge for overages in data use, where you could end up with an accidental overdraft in your checking account. If you’d prefer to keep autopay on for your cell phone, consider setting up notification reminders when you’re getting close to your data limit or request that your services be cut off once you hit the limit until your cycle renews. That way, you’ll never pay a surprise overage charge again.
The bottom line
It’s essential to monitor your accounts rather than just trust that recurring payments will get the job done. Pay particular attention to these five bills and consider whether setting up autopay will help or hurt your financial situation.
