There are pros and cons to autopay

Autopay can help automate the process of paying bills and make life simpler. However, if used incorrectly, it can raise costs and increase hassle.

David Gray/Reuters/File
A customer uses an Automatic Teller Machine (ATM) at a branch located in Sydney, Australia, October 30, 2015. Autopay allows participants to pay bills and loans without heading to the ATM or writing checks.

Autopay is a powerful tool that enables automatic withdrawals from your bank account to pay bills — you don’t even need to look at them anymore! But autopay can save or cost you money, depending on how you use it. Consider these pros and cons of autopay.

Pros of Autopay

Wise Bread writers often advise readers to take advantage of autopay — and for plenty of good reasons.

1. No Late Payments

When you turn on autopay for a bill, you will never have a late payment on that bill again — unless your bank account has insufficient funds, of course. That’s huge, because even one late payment can result in a drop of your credit score, making it more difficult and expensive to borrow money. Autopay helps protect your credit rating by removing the risk of late payments.

2. No Late Fees

If your payment arrives even a day late, this can cost you $25 or more in late payment fees. Additionally, your interest rate can be increased, which can cost hundreds of dollars per year. With autopay, you will never need to pay late fees, since your payment will never be late.

3. No Postage Expense

You will never need to put a stamp on an envelope to mail in a payment. Your payment will come out of your account electronically, with no need for postage. Why pay 49 cents for a stamp when you can sign up for autopay for free or use electronic bill payment?

4. No Checks to Write

Since autopay uses electronic funds transfer, you will not need to write checks, either. I used to write about 20 checks every month to pay bills. Now, with autopay and electronic bill payment, I almost never write checks anymore.

5. Save Time

Saving time is probably the biggest advantage of autopay. You don’t need to find time to sit down and pay your bills — the bills will get paid without any time or effort required. I haven’t manually paid my electric bill for over four years.

Cons of Autopay

Despite the convenience, autopay is not without its risks.

6. Lose Touch With Your Bills

If you have bills on autopay, it is easier to lose touch with how much you owe, or how much you are paying. This is especially important when you’re able to make extra payments and pay down debt such as student loans, credit cards, or mortgages faster. The missed cost savings from not following your balances closely can be significant. Avoid this blunder by making a point of checking balances regularly.

7. Unexpected Fees

With automatic payments, you may not actually review your bill before the payment is made. This means you may not notice hidden fees, increases in interest rates, or other changes or mistakes. Again, regularly reviewing your bill side-steps this concern.

8. Bills for Unused Subscriptions

It is easy to sign up for autopay for magazines, cable TV packages, satellite radio, health club memberships, and other subscription services —  but then forget to unsubscribe if you stop using them. This can result in a lot of wasted money.

9. Remaining Manual Payment Bills Get Lost

If most of your bills are on autopay, it is easier for the few bills that you do pay manually to get lost in the shuffle. I have a few bills that I pay using electronic billpayer that are not automatic, and I sometimes set these aside until I get around to them. I have come close to missing due dates on these a few times. The solution: “Automate” the payment of manual bills, too, by setting payment reminders in your calendar.

Autopay is a phenomenal convenience, but over-relying on automation can cause you to miss important details, and potentially overpay in the process. Set reminders to look at your statements regularly in order to get the maximum cost savings and benefits from autopay.

This article first appeared at Wise Bread.

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