Be Wary of Automatic Payments with Credit Cards

When it comes to convenience, credit cards are what come to mind. Long ago, you had to haul actual metal or wood to exchange goods. Nowadays, all you do is swipe a plastic slip weighing less than half an ounce. So why is it so convenient? Because the merchants and credit card companies know very well that the easier it is to part you from your money, the more frequently you'll do it.

With all the conveniences of credit cards, they want to give you yet more convenience now, in the form of automatic credit card payments. The idea is that you don't even have to worry about your credit card - just spend as you like, and the credit card company will automatically deduct what you owe. Automatic Payments sound great and really easy, but you need to be really careful about it. Because instead of providing convenience, it may backfire and cause a headache.

There are a few options with the automatic payments. You can have your minimum amount due automatically withdrawn, some predefined amount, or the whole balance.

The following are some of the main issues to consider before allowing the credit card company to automatically take your money.

How often and how do you use your credit card?

If you use your credit card very frequently, the chance of errors in your statement goes up. Do you want to automatically have your statement paid when there's a decent chance there is an error, an overcharge, or even some theft by a merchant invovled?

If you use your credit card for many online payments, you'd want to keep an eye on your statement to make sure things are as you expect.

How much money do you have in your bank account?

It doesn't make much sense for a student on a tight budget to sign up for automatic payments. The main reason is because mistakes can easily happen. I can personally attest to the fact about that. The main problem is when you misunderstand how the automatic payments work, and then seeing overdraft charges on your bank account.
For example, if you're signed up for the auto-payments, and then you pay half of your balance manually in the middle of the month, you will probably still have the full balance withdrawn at the end of the month. For example, if you owed $500 for the month of July and paid $200 of it manually after making a purchase in the beginning of the month, they'll likely still withdraw the $500 at the end, since the website's back-end program is set to automatically do that. Then you will be forced to waste a lot of time calling up your bank and credit card company to fix things.

Are you the type of person that would not mind if you overpaid unknowingly?

I'm not sure about you, but I prefer to know what I am paying for before I pay it, especially if it may be in the hundreds of dollars. Credit card companies are not likely to double check and carefully scan your statement before billing you. And sometimes you are signed up for magazines or random things without knowing it.