The Truth About Credit Cards.com

While it’s generally suggested that you set up automatic payments via your checking account or credit card, there are some drawbacks that you should take note of.

First of all, if you lose your credit card or need to close your checking account, it can be a major hassle reorganizing all of your automatic payments.

I know because I recently had to close my checking account, which led to a lot of work shifting all my automatic payment information with my utility companies, mortgage, auto lease, my credit card issuers, cell phone provider, and more.

In fact, one automatic payment slipped by without me realizing, causing major problems, namely because the new payment information takes anywhere from 5-7 days or longer to update.

The payment was ultimately rejected because it came from a closed checking account, resulting in a bounced check, a late payment fee, and payment default.

My 0% APR immediately skyrocketed to over 30%, and when all was said and done, I had about $300 in fees related to the mishap.

I quickly got on the phone with the credit card issuer, explained the situation, and sent in documentation proving that my checking account was closed due to fraud.

After the credit card issuer received my documentation, the situation was resolved, I made a manual payment to get caught up, and they erased all the related fees and lowered my APR back to 0%.

It could have been a lot worse, especially if I didn’t monitor my account online as I do with all my accounts at least once a week as a safety precaution.

Had I waited until I received a statement at the end of my billing cycle, I could have run the risk of a 30-day late on my credit report, causing major problems for me and my credit score.

Yet another reason anyone with a checking account or a credit card should use online banking tools to keep an eye on their accounts.

Another issue with automatic billpay is that you permit creditors to withdraw whatever amount you charge in a given month, which can definitely fluctuate if you’re not careful.

Imagine you have a cell phone bill, and though it’s typically under $50 a month, one month it jumps to $350, causing an unexpected overdraft in your account.

That’s why you should keep an eye on Automatic billpay just as you would manual payments, to ensure you aren’t being overcharged or running the risk of overdraft.

Whatever you decide, find a system that works for you to avoid unnecessary finance charges, late fees, and credit score dings.