Missing payments on a loan, credit card or utility bill can do big damage to your credit score. Fortunately, many companies now let customers set up automatic bill payments tied to a card, checking account or third-party service. But there are some things to know before taking advantage. For starters, “you must not use the auto-pay as an excuse not to still check your detailed monthly statement carefully,” Thomas Nitzsche, media relations manager for ClearPoint Credit Counseling Solutions, said over email. You’ll still need to monitor credit card statements, and you’ll want to check bills to make sure that you’re being charged fairly.
Here are some other tips for auto-paying your bills.
1. Consider Your Plan
Some service providers charge a fee to pay with credit. And if you link your payments to a checking account, you’ll need to make sure you have enough money when the bill is set to debit so you don’t incur overdraft or late payment fees. Those on a tight budget “may need the flexibility of making the payment when you know the money is in the account, taking into account the billers’ grace period,” Nitzche says.
2. Don’t Set Every Bill
Any bill left unpaid long enough could wind up in collections and then hurt your credit. But not everyone should be debited automatically. “One item you may not want to put on auto billing is any subscription-type charge, which will auto-renew,” Nitzche warns. “The renewal notifications can easily slip past you and in some cases, they cannot be refunded once billed.”
3. Know Your Cards
If a card tied to auto-pay expires, a payment after the fact may get rejected—and yes, this could hurt your credit. To avoid this, “keep track of which bills are billing to which cards, and be sure to make updates if the card number or expiration date is renewed,” Nitzche says.
4. Beware Phishing Scams
Setting up auto-pay means turning over sensitive payment information to another third-party, which leaves you open to fraud. It’s a good idea to be vigilant should you learn any company you gave this data to is compromised. “Any emails, text or calls from the biller should be verified to ensure it is not fraud,” Nitzche says, noting phishing scams.
If you have reason to believe that your personal information has been compromised, keep an eye on your credit report. You can pull your free annual credit reports at AnnualCreditReport.com and check your credit scores for free every month on Credit.com. A sudden drop in your score, mysterious addresses and new credit lines that you didn’t open could be signs your identity has been stolen.
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