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Be careful shifting into automatic bill pay

What to automate
The best candidates for automatic payment arrangements are those bills that are the same amount every month. "They're not as likely to be the source of contention or error," says Arnold.

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Still, even then, there can be errors. The two most common ones are getting the amount wrong and accidentally double billing.

You should skip automation for bills where you want to verify charges before you pay (like charge cards and some phone bills.)

It's also better to set up the arrangement only with companies you really trust, especially if you're using an automatic bank draft or debit card (both of which give instant access to your bank account), rather than a credit card.

"I would be extremely cautious about giving anybody access to my checking account," says Fox. "Both the protection and technology just aren't up to it."

If you automate, you should still get an advanced notice of the transaction in the mail, says Fox. Use it as a reminder.

One alternative to letting someone access your credit card or checking account: Use an electronic bill-pay system through your own bank to take care of bills. "You have much more control this way," says Linda Sherry, spokeswoman for Consumer Action.

The only downside: Some merchants will only allow automatic arrangements if you give them access to your bank or credit card and let them take the money. If the price of the "convenience" is loss of control over your finances, you might just want to say "no thanks."

New options, new challenges
These days, you can put more than just a gym membership or utility bill on autopilot.

Some apartment complexes are allowing tenants to pay rent through automatic payment plans.

It has its advantages, but if the complex charges a fee for the convenience, forget it.

The other problem: the temptation factor of paying with plastic. "The potential danger, particularly when you're talking about rent, is like any other large credit card purchase, you run the risk of running up debt," he says. "You get the bill. Instead of paying the full $600 rent, you might find it easier to pay $550. That's a slippery slope."

Just remember you're in the driver's seat. While lenders and property management companies can encourage setting up automatic payment plans, they can't require them.

Stopping automatic payments
Setting up auto-payment arrangements is easy. But in some cases, stopping them can be problematic, especially if the company you were paying isn't cooperating.

When you're ready to stop an automatic payment arrangement, contact the bank or credit card company first, not the company being paid.

Notify the bank or credit card company by phone. Follow up in writing so that you have a record.

While a credit card is usually better in terms of dispute rights, no system is perfect.

"Sometimes in that case then the credit card company goes back to the merchant, the merchant says it's a valid charge," says Sherry.

-- Posted: Nov. 1, 2006
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