Paying your installment loans, your mortgage and car payment via auto-pay is a simple way to make sure that the critical bills get paid every month.  It helps you avoid late fees.  The payments are secure.  It helps reduce paper invoices.

But before you AUTO-PAY all of your bills, there are some that may not make sense to streamline.

First of all, use the automatic payment option only if you are positive that you will have enough money in the account to pay that bill on the due date.  Otherwise, you may have overdraft charges and the bank may charge you interest on the overdraft (because basically it’s a loan).

Here are some bills that you should avoid putting on auto-pay:

  • Annual subscriptions, annual memberships, or semi-annual insurance premiums. You are more likely to forget about them and you may end up overdrawing your account or are getting charged without realizing it.
  • Utility, Telephone and Cable Bills. Those bills fluctuate from month to month and could be a different total each time. As a result, you might either overpay or underpay.
  • Credit Card Bills. A minimum payment is usually required and it could change month to month based upon your credit card balance.
  • Trial Services. It’s tempting to sign up for a free trial but, when you do, read the fine print.  Most trial services ask you to enter your credit card information and ask you to check a box that you authorize auto-pay—UNLESS YOU CANCEL the service before the first charge.  Put the expiration date of the trial service on your calendar and determine if you will continue to use the service or cancel it before the expiration date.

One more thing—most auto-pay bank accounts have check boxes where you can request both a notification 5 days BEFORE a bill will be paid and an ALERT checkbox when the money has been taken out of your account.  It’s a great heads-up service to ensure that your account is never overdrawn.