For the past several years I have had the majority of my accounts set up for automatic payments. My gas bill, electric bill, Comcast bill are all set up automatically. I pay my mortgages and even my Netflix payment automatically. I have my Betterment account, as well as my HSA and IRA accounts set up for automatic withdrawals as well. Automatic payments are great because they provide the protection of not having to remember to actually pay our bills. Overall I love automatic payments, however the price of automatic banking is that sometimes withdrawals are made when they shouldn’t be, or even worse, payments aren’t made when they should.
Problems With Automatic Payments:
Recently I have had 3 problems with automatic payments being issued improperly, thankfully I frequently review my accounts and was able to correct these errors before they became major problems.
Issue 1: Michigan Gas Utilities:
I have been a customer of Michigan Gas Utilities for 12 years and I set up automatic payments when I bought my first home. I have never had any problems with them until I saw my June Gas bill. Normally in the summer our gas bill is around $25 per month, my June gas withdrawal was for $73. I knew there had to be a problem and I actually started looking around the house for a gas leak, to no avail. I then looked at the meter readings and went out to look at the meter. What had happened was a fairly obvious mistake. The meter reader misread the hundreds column. Instead of being charged for the 6 CCF we used, we were charged for 106 CCF.
When Mrs. C. contacted customer service, not only did they refuse to issue a refund, they wouldn’t even have the meter re-read. Their solution was to read it in July at their normal time, and then adjust the next bill accordingly with a credit. Since I grossly over paid the credit will be applied for 3 – 4 months. This was completely unacceptable. What if the meter reader misread the thousands column instead of the hundreds column? Would I have a credit of $773 that would take over a year to use up because of their mistake? What if, like 2/3 of Americans I have less than $1,000 in savings? Would they pay the fees for bouncing my bank account? I receive E-statements, which I never read, so this was a big wake up call to me to be extra vigilant of these statements, that way if I catch the mistake before payment is made I have a chance to get it corrected.
Issue #2: Mathnasium:
Our oldest son struggles in school, especially with Math. My mom offered to pay for tutoring for him and we enrolled him in our local Mathnasium. They offer 1 hour sessions and kids can attend as many sessions as they like each month for a flat rate, which was around $200. We were enrolled for about a year and a half, but with school starting up we decided to cancel the tutoring because it is extremely burdensome with our schedules during the school year. We cancelled the policy and had multiple conversations with the manager about this before hand. The next month, what do you think happened? Like clockwork they took out a full payment,even though our kid hadn’t been there for multiple weeks.
After calling them and having a brief discussion, a refund was issued with no problem. Had we not caught it, I’m sure they wouldn’t have caught it and that money would have been long gone, and very easily could have continued to happen for several months.
Issue #3: Health Savings Account:
This was actually the opposite problem. Towards the end of last year my Health Savings Account provider switched banks. I didn’t think much of it and all I had to do was update my username and password…or so I thought. It didn’t occur to me that my automatic payments, which I had scheduled to continue forever would need to be reset. I didn’t notice that my deposits to my HSA were not happening for about 6 weeks. I ended up having to deposit a large payment, then reset the automatic payments. Once again, this problem could have been avoided with more vigilance on my side of the equation.
Overall I love automatic payments, but it can’t be a “set it and forget it” policy. Constant vigilance is needed to ensure that payments that need to come out do come out and that they are all for the correct amounts. I’ve been pretty lucky in that all of my automatic payment issues have been relatively small and without major consequence. There are plenty of horror stories of utilities being shut off and even worse insurance policies cancelled because of problems with automatic payments.
Do you use automatic payments? Check out the book “The Automatic Millionaire” on how automating investing over the long haul can result in big gains.