Automatic Payments


Automatic payments let consumers pay bills electronically, without the need to write and mail paper checks, and without the risk and expense of late fees.  Some consumers set up automatic payments through their banks or other financial institutions, like credit unions.  Others set up automatic payments through their credit card companies.  Still others make arrangements directly with their service providers, like mortgage companies and insurance companies.  While automatic payments are convenient, problems sometimes arise.

Initial Considerations

  • Set up automatic bill payments only with reputable companies that you trust.  Remember – when you set up a payment arrangement with a service provider, like an insurance company, you’re giving that company direct access to your account.  
  • Bills that are the same, or approximately the same, every month are good candidates for automatic bill pay from your checking or debit account.  It’s easier to budget when the automatic payments are about the same each month.   
  • Consider non-automatic online bill payment for accounts with fluctuating balances.  This option gives you an extra opportunity to verify charges before a payment’s made.  Because you’ll be able to specify the amount you want to pay in response to a specific bill, it also minimizes the chances of inadvertently overdrawing your account. 
  • Before setting up an automatic payment arrangement, check for applicable fees, restrictions, and limitations.  Also make sure to review policies regarding payment errors and disputes.  
    • For example, if an erroneous payment results in an overdraft, will the bank or company pay your overdraft fees and related costs?  How will it respond if its missed payment means you’ve lost a 0% promotional rate on your credit card?  The fine print might reveal that the arrangement is better for the company than for you.
  • Using your credit card for automatic payments maximizes your protection in the event of billing errors or disputes.  Automatic payments also can help you quickly earn rewards points.  But beware!  These advantages quickly turn into disadvantages if the credit card balance isn’t paid in full each month, or if you’ll accrue credit card interest from the date of the charge.   

Review Your Bills and Statements

  • Despite the convenience of automatic payment, continue to review your billing statements to make sure that current charges are correct.  It’s easier to address a billing dispute before the merchant has your money.
  • Review your billing statements and bank account statements to make sure that they accurately reflect payments that have been made.  The review might disclose double payments or a different amount than the one you expected to be paid.  It might even disclose that a payment hasn’t been made or received. 
  • If you notice erroneous or missing payments, immediately contact the financial institution or service provider that’s authorized to automatically withdraw money from your account.  If you’re not able to resolve the problem, you may need to close out your account and open another.

Cancelling Automatic Payments

  • Automatic payment arrangements set up through your bank account or debit card are governed by the federal Electronic Funds Transfer Act. 
    • While that Act gives you the right to stop an automatic transaction with three days' notice, whether oral or written, some banks may insist on up to 14 days’ written notice.
  • To permanently stop an automatic-payment arrangement, notify the bank, service provider, or credit card company by phone and follow up in writing so that you have a record. Copy your bank on the notification letter sent to your service provider. 
  • Review your statements for several months to ensure that the arrangement is permanently terminated.
  •    In response to requests to terminate automatic payment arrangement, banks frequently refer consumers to the service provider. 
    •  As a general rule, it is the legal obligation of the bank to terminate payment upon notification.  If the payments continue, double-check how the payment arrangement was initially established to determine you’re contacting the correct entities. 

Where to Go for Help

  • Direct complaints regarding national banks (those with the word “National” or initials “N.A.”), including most major credit card issuers, to the Office of the Comptroller of the Currency.  Banks and other regulated financial institutions are exempt from the Virginia Consumer Protection Act.
  • Complaints regarding thrifts should be directed to the Office of Thrift Supervision.  
  • Complaints regarding Virginia banks should be directed to the Virginia State Corporation Commission’s Bureau of Financial Institutions.

 

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