Thursday, September 18, 2014

Automatic Payments to a Credit Card

Photo from: Eddie Ross
I really enjoy paying bills. Considering the stress it causes some people, I realize that this sounds a little odd, but I really do like the act of assigning payments to the various services I use. Parting with the money itself may not be much of a highlight, but there's something about sitting down to schedule payments for the month that feels like an accomplishment -- a tiny victory. Not just due to the accomplishment of ticking a task off the list, but also for the simple reason that I am able to pay that bill, and pay it with my own money. It is one item on my to-do list that I am happy to tackle each month -- just a little thing that makes me feel both grateful and proud for a few moments a dozen times a year.

Not everyone gets that same feeling of small success. Many people do not enjoy paying bills, and many even forget. But forgetting to pay a bill on time is extremely detrimental to one's credit score -- in fact, if a person can change just one thing to improve her credit score, the easiest is to be certain to pay each and every bill on time.

An example of my own is that a few years ago I made a purchase at a store using a gift card. The item was just a few dollars more than the gift card, so I put the balance on an otherwise balance-free card... And then promptly forgot all about it. I missed the $10 payment, and because I didn't notice the paperless bill that must have come into my inbox, I missed the payment again the following two months. By the time I was contacted with a paper notice, my bill was three months late and had been reported as missed to the credit score agencies. That silly $10 ended up lowering my credit score, and I watched month after month as that tiny missed payment showed on my credit report for a full 24 months. It was so terribly frustrating.

Everyone is susceptible to forgetting a payment when life gets in the way, and my case is a perfect example. But if missed payments are something that happens more than once in a few years, setting up automatic payments is a smart way to tackle the problem. However, automatic payments that pull from one's checking account are not something I'm comfortable with -- I don't like the idea of money being pulled directly out of my checking account before I even have a chance to review the bill. I could be charged fees I'm not expecting, or potentially even a penalty that I didn't have a chance to contest. If one's checking account balance is low enough, unexpectedly high automatic debits -- or just ill-timed ones -- could even incur penalties from the bank. And once the money has been debited, it's harder to get it refunded than if the payment hasn't yet been made.

An alternative is to only set up automatic payments that can be charged to a credit card. Instead of the charge debiting a checking account, it charges a credit card, so there's a chance to review the payment even after it's gone through. Plus, if the company charging the fee won't help with an erroneous charge, the credit card company usually offers more options. And as long as one keeps her credit card balances reasonably low, there's no worry about additional charges like there could be from a checking account being overdrawn.

Lots of companies offer this type of automatic payment to a credit card -- a friend has everything from her monthly gym dues and cell phone bill to her house cleaning service automatically charged to a credit card. For her, reviewing the charges in one place -- her credit card bill -- is easier than worrying about paying individual bills each month.

There are tons of ways to keep from missing payments, and this one works for my friend. No matter the strategy, the important thing is just to work out something. Something that really works so that payments are not missed... And hopefully save a little stress in the meantime.

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