Caught in the Black Hole of Automated Payments

Posted on 25. Feb, 2006 by in Saving & Investing

automaticpayments.jpgIf you’re like me you haven’t written a check in years. Instead, I use automated payments for everything from my cell phone bill to my electric bill. The automated payments are simple to set up and convenient for people like me with a horrible memory and limited time.

However, the WSJ is reporting that debt counselors, lawyers and Better Business Bureaus around the country are hearing an increasing number of complaints from consumers having problems stopping the recurring bills charged to their bank accounts and credit cards.

Because vendors are reluctant to give up the stream of payments that come with automatic debits, “they will make it as difficult as possible,” says Elizabeth Warren, a law professor at Harvard.

If you are contemplating stopping a recurring payment you should be aware that there is usually more than one person to call. Most people stop after calling their credit card company; however, if the vendor doesn’t know about your intentions then it will continue to try and collect. It’s really up to you to make sure that you contact everyone involved in order to cancel your recurring payments. However, if you’ve done your part and the payment still comes through, you can dispute a recurring charge in writing within 60 days after it shows up on a statement. Doing this each month, however, requires vigilance and effort on your part.

The WSJ also reports that “for people who want to cancel recurring bills paid directly through a bank account or put on a debit card, there are more protections, as long as they follow the rules. Under federal law, a bank must stop making automatic deductions from your account if you so instruct them, either orally or in writing, at least three days before the payment is made. However, some banks also require written instructions, which they must tell consumers to provide. Once canceled, the bank is required to stop all future payments. It’s advisable for consumers to also notify a merchant but it is not required.”

Some experts advise that consumers are better off paying bills online via their bank’s Web site, but if you want my opinion, between the cost of “free bill pay” and the hassle that it causes it’s better to set up recurring payments. However, you also need to follow the appropriate steps in order to stop that payment. Also, paying by credit or debit cards can often earn you rewards depending on what credit card you’re using.

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