MY ELDERLY mother’s credit card was recently compromised. This required her to move all her automatic payments to a new credit card.
That, in turn, prompted her to reevaluate these various charges. Her cable bill, for instance, had gone up more than 15% over the past two years. My mother complained that, while she gets many channels, she only watches broadcast TV. She dropped the cable package.
As she added the autopay information to her new credit card, my mother noticed another service she no longer needed. She has an Apple watch, which allows her to call for emergency help if she falls. That meant she no longer needed the separate monthly lifeline service to which she subscribed.
Without a doubt, there are many benefits to setting up automatic payments, including ease of use and avoiding late fees. But unless they’re properly managed, these autopays can cause problems and waste funds. Companies know that consumers are more lax in reviewing their autopay bills and tend to keep the services for longer. Annual automatic renewals can sneak up on us and—next thing we know—we’re charged for an entire year. My mother, like many of us, pays more attention to bills that require her to write a check.
Want to save money and avoid problems with your autopays? Follow these seven steps:
1. Make a list. Create a comprehensive list of your various autopay charges, along with each company’s contact information. This will help you—and your executor.
2. Review. Look over each autopay on a regular basis. Check to see if the bill has gone up. My health club slipped in a 12% rate increase. When I questioned the increase, it was removed. I wonder if they added this fee to all autopay members and waited to see who’d notice.
3. Get it on paper. If there’s no additional cost, think about getting a hard copy as a reminder to review these charges.
4. Renegotiate. Consider questioning bills that have gone up. Many times a better deal becomes available if you ask.
5. Reevaluate. Decide if you want to continue the service. One of my financial planning clients automatically paid for a gym membership, which she only used twice last year. She still hopes to work out. But for now, she’s put her membership on hold.
6. Update. Whose bills are you paying? Are you still covering car insurance or cell service for your adult children by choice—or because of inertia?
7. Check funding. Make sure there’s always enough money in your checking account to cover your autopay charges, or overdraft fees will negate the advantages.
Rand Spero is president of Street Smart Financial, a fee-only financial planning firm in Lexington, Massachusetts. His previous articles include Self-Sabotage, Human Factor and Why Wait. Rand has taught personal finance and strategic planning at the Tufts University Osher Institute, Northeastern University’s Graduate School of Management and Massachusetts General Hospital.