When it comes to managing your monthly bills, it doesn’t get much more convenient than auto-pay. Because this option eliminates missed payments and late fees, it’s easy to see why three-quarters of Americans have opted in, with anywhere between one and seven monthly payments, according to recent survey findings.
However, consumers are also discovering that enlisting in auto-pay isn’t without its financial downsides. The following survey findings from TheZebra.com (an insurance comparison site) show how auto-pay can make consumers complacent.
* Nearly a quarter of people (23%) admit to not paying attention to what’s coming out of their bank accounts. If the result is an overdrawn account or a billing error slipping through, that can prove to be a costly mistake.
* One-third (29%) of respondents confess to forgetting to cancel services linked to autopay after they’ve stopped using the services. A couple prime examples of this are a music streaming service subscription or a gym membership.
* Nearly half of consumers indicate that once auto-pay is set up for their car insurance payments, they never get around to re-evaluating their fees. Considering the market value of our cars depreciates every year, this suggests that many consumers are missing an opportunity to get the best coverage at the best price, as car insurance rates can change daily.
* Finally, by not taking time to evaluate costs or cancel unused services, consumers are paying the price. Some 29% of respondents estimate they’re losing $100 annually, but for high-ticket items like a gym membership, the savings could be in the thousands.
Now that you know the high price you may be paying for the convenience of auto-pay, here are some tips to help you stay in control of your finances.
1. Keep track of your statements.
Because money is withdrawn from your account each month, it’s easy to lose track of your spending. Otherwise, if a price hike takes effect or if you end up consuming more services than expected, the consequence can be a higher-than-expected bill. If your bank account lacks the funds to cover it, you’ll end up with an overdraft, which can end up costing you more than any late fee! So when auto-pay takes effect, make sure you review the monthly statements. If you see an additional charge or a price hike take effect, follow up immediately.
2. Research rates at least twice a year.
While your service provider may offer excellent service at a great rate, it’s always possible there’s a better deal for you somewhere else. Take time to research and compare the going rates for things like internet service and car insurance - you may be pleasantly surprised. To make sure you follow this step, set up six-month reminders on your phone or calendar and commit yourself to following through. If you end up using the service less often than you planned - or not at all - this reminder can give that much-needed nudge to reevaluate.
3. Take time to fully understand your options.
As you know, some service agreements, such as gym memberships and mobile phone contracts, can’t be canceled without penalty - at least, not until you’ve reached a specific end date. But don’t make the mistake of thinking this rule applies to all service agreements. For example, did you know you can switch your car insurance anytime without paying a penalty? It’s true! In fact, once you switch, your old insurer will send you a rebate for the balance, even if time remains on your six- or one-month policy. So go ahead and shop around. If you find a car insurance provider that’s more affordable and provides the coverage you need, you can reap the benefits right away. Just remember, if you do decide to switch, don’t cancel the old policy until the new one is officially in place. Otherwise you might get charged a penalty for the gap in coverage.