Setting up automatic bill payments saves you time and money. Automating your payments can also help you pay your bills on time, avoid the interest and penalties associated with late payments, and even maintain a good credit score. But to get the most out of automating your monthly bills, you need to take steps to minimize the risks. For example, the company that is automatically debiting your account could overcharge you. Here are five ways to safeguard your automatic bill payments.
1. Reconcile. Remember to reconcile your bills every month. Failing to stay on top of your bills is one of the biggest causes of credit card debt. Even though I pay bills automatically, I still get paper copies sent to me. I review each bill and compare it to the bill from last month. This way I get a sense of whether or not the bill is appropriate. If for some reason the amounts are off, it indicates that either we are wasting money or that the bill is wrong.
2. Get another person to review. I create a file each month for my wife to review our personal and business bills. She is much better than I am at going over everything and looking for ways to cut spending. Even if that weren’t the case, you’re better off if your partner or spouse reviews your bills too. It’s always good to have an extra set of eyes go over the bills.
3. Act quickly. If there is a problem with a bill, call the company immediately. Bring the problem to the attention of the company and write down who you spoke with. Call back the next day to confirm that the problem has been corrected. Acting quickly to correct problems is especially important if you are looking for ways to improve your credit score.
4. Don’t auto pay from your bank. I suggest that you have all automatic debits charged to your credit card. This way, if there is a problem, you can dispute it with the credit card company and not be charged. When you tell the credit card company why you dispute the charge, they will contact the merchant and clear it up before they agree to release the funds.
5. Download every few days. I download data into my budget tracking software every week. This way I know what’s being charged, how much, and by whom and can catch problems before they go on too long. Companies make mistakes all the time. Even when you are automatically paying your bills, make sure you carefully screen them for errors.
Neal Frankle is a certified financial planner and runs Wealth Pilgrim, a personal finance blog that helps people make smart decisions about their money. As a start, he suggests that you strive to understand your credit score range.