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Autopay allows you to set up automatic bank withdrawals or credit card payments to cover your bills.
The payment method appeals to consumers for two reasons: it simplifies bill payments and can save you money.
Plus, some companies offer a slight interest rate reduction or bill discount when you set up automatic payments.
However, autopay isnt perfect and can cause major money management problems.
That way, you might avoid the same fate.
Also here are 11 bills you should never put on autopay.
I didnt want to risk forgetting a payment and hurting my credit score, she said.
As a result, her cash flow was temporarily impacted, leading to unnecessary frustration.
While Bishop plans to continue using autopay due to its convenience, she has adjusted her strategy.
That way, I avoid overpayments while still getting the benefits of autopay, Bishop said.
Her major takeaway from the experience was to pay attention to how payments get applied.
Its important to know whether extra payments go toward the principal balance or are applied to future payments.
In many cases, you better specifically direct how those payments should be allocated, she added.
Mirandas Story
Miranda Marquit, MBA, is a financial wellness advocate who also uses autopay often.
Autopay can be a great way to stay on top of bills, especially if you travel a lot.
Over the years, shes had two autopay-related issues.
The bank processed all of the transactions at once, resulting in a negative account balance.
Marquit ended up with a cash flow problem and two overdraft fees totaling $70.
The next issue happened when her apartment lease got renewed.
Like Bishop, Marquit will continue to use autopay because it makes her life easier overall.
However, shes monitoring it much more closely.
However, Marquit didnt do that previously and let all her automatic payments cluster together.
Staying proactive by double-checking your payments and understanding your banks system can help you avoid hiccups like overpayments.
Its a tool, not a replacement for regular account management, Bishop added.
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