It seems so convenient, doesn’t it? You quit receiving statements and bills in the mail. You no longer receive notifications about making your payment. You don’t have to talk to anyone. That is what we like, right? If we don’t see it, it really doesn’t exist.
That’s why we love the option of automatic payments. Check your cable bill? Nah just put it on auto pay. Check your credit card statements? Forget about it. Set your payments to auto pay! Paying your auto loan is easy. Just put it to auto pay!
Automatic payments, if mismanaged, is how you can easily become a financial zombie. Of course, credit card and financing companies want you to make automatic payments. They consistently throw the offer in your face. They will even go as far as to provide some type of incentive if you start making automatic payments each month.
Do you really think it’s all about helping the environment and not using any more paper? Do you really believe they want to make your life easier? I can answer both for you. NO! And there are several reasons why.
How Automatic Payments Hurts Your Finances
Automatic payments have long been the “go to” for keeping your finances on track. While they may help in never missing a payment, they can actually hurt you in other areas. Yes, you can actually waste money while making automatic payments. Before you turn auto pay on, take a look at how they can hurt your finance if you’re not careful.
Give Me All That Interest Baby
This is where they hurt you, or you could hurt them. The longer you are paying the bill, the more interest you will rack up. If you have your payments are automatically coming out of your account, you are most likely paying the minimum each month. Just paying the minimum could take you forever, especially with all of the interest charges building up each month.
You can check your credit card statement right now (if you even get one), and you can see how long it will take you to pay off your credit card by just making the minimum payment. I’ll give you a hint, it won’t be soon.
Just being on auto pay will prevent you from making bigger payments each month. This mean you won’t be getting your balance to zero any time soon, and you will remain paying off the interest charges and not your actual balance.
A Charge Here, A Fee There
Cable companies are notorious for doing this. Just a small fee for this month for something no one has ever heard of. Just a tiny charge for something you didn’t even know you did.
How can they do this? We’re making automatic payments. Aren’t they just trustworthy? They want to help us out so much by making sure we never see what fees they have in store for us this month.
Your automatic payments are coming out each month, you can trust them for that. But, they know that you will never notice the few extra dollars added because you are not going to check your statement. We don’t have time to. Well, you better make time.
They will try to justify these fees by making them sound very technical, but they are just blowing smoke. Get off auto pay and check all of your statements. Call them out on it, and tell them you are going to look for a better service. Things will get a little uncomfortable, for them.
Do you ever see a great deal for a trial period that you can cancel at any time? You always promise yourself, “I will just do it for the free trial period, and then I will cancel to not spend any money.” Why do we lie to ourselves?
The first red flag is when they ask for your credit card information. You know, to just keep it on file. They promise that you that it’s so easy to cancel at any time.
Here’s the catch. WE NEVER CANCEL. Oh, and when you don’t cancel you have to pay for the three months that you’ve been using their service for the trial period. You also have to pay a start-up fee. If you want to cancel, you have to pay a cancellation fee. It is such a smart and deceiving plan.
If you are using a service making automatic payments, they know they have you for an auto-renew. Why? The notification would have come in your statement that the option to cancel was coming up, but you decided to no longer get notifications. You missed out on the opportunity to cancel their service and shop around for a better service. Now you are locked in for an entire year.
Have fun with that.
Get Off Auto Pay
If you are going to make a positive change in your financial decisions, you must stop making automatic payment. At least begin managing your account on auto pay by checking them regularly. How can you make wise decisions when you don’t know exactly where your money is going? How much you’re spending? And, whether you need to stop spending that amount?
Start being a financial ninja and take the time to manage all of your finances.