4 Risks of Putting Everything on Autopay

Auto-pay may be convenient, but it also has some risks you should know about.

There's not much debate when it comes to the best way to pay your bills. Manual payments take time out of your day, whereas automatic payments don't. You could forget about a manual payment and get stuck with a late fee, but with automatic payments you'll never need to remember due dates again.

While there are several smart reasons to set up auto-pay, there are also ways it can end up costing you money. That doesn't mean that you should avoid using auto-pay entirely, but you do need to be aware of the risks so that you can steer clear of them.

1. Overdrafting your account

When you make manual bill payments, you can always check that there's enough money in your bank account before you pay. But with auto-pay, there's a greater risk of overdrafting your account because you probably won't be checking your account before each bill payment.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.90% Rate info 3.90% annual percentage yield as of December 11, 2024. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.90% Rate info 3.90% annual percentage yield as of December 11, 2024. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

You could have a bill that's more expensive than usual or your paycheck could get deposited a few days late. These or other issues could mean you overdraw your bank account and incur an overdraft fee. The alternative would be that your bank denies the transaction, in which case your bill payment would be late.

The best way to avoid this is to monitor your account balances and your bill payment amounts. Even when you use auto-pay, it's still wise to track how much is going in and out of your accounts. For extra security, you can use a bank account with overdraft protection. 

2. Forgetting to cancel services you're not using

If you're like most consumers, then you probably use some services with recurring payments. Maybe you have monthly payments set up for the gym. Or you have Amazon Prime for that free two-day shipping. Or you're signed up for three different video streaming services (and counting).

The problem is that if you have everything on auto-pay, you may not see those recurring charges for services you've forgotten to cancel. A year later, you're looking at your bill and wondering how much money you've wasted on subscription services you weren't using. That's why you should review what you're signed up for regularly and cancel anything you don't need.

3. Gradually spending more because you're not watching your accounts

When all your bills are getting paid on time, it's easy to assume that you're doing fine in terms of money, even if you aren't keeping an eye on how much you're spending.

That's where auto-pay can give you a false sense of financial security. You could start spending more on shopping, going out, or other discretionary expenses. If you don't catch this early on, your spending habits can gradually get worse and worse, potentially even leading you into debt.

You can avoid this by continuing to monitor your spending every month, either on your own or with a budgeting app. It's also a good idea to automate transfers to your retirement and savings accounts, as this ensures that you don't lower your contributions to either of those.

4. Not noticing extra charges

Although auto-pay can save you time on paying your bills, you still need to take time to review your charges. Otherwise, there could be extra charges that slip by without you noticing them.

For example, a service provider could raise your monthly rate -- anyone who has purchased a promo internet or cable package is probably familiar with this. Another possibility is that you end up with erroneous or fraudulent charges on your statement. If you aren't reviewing all your transactions, you could pay extra without even knowing it.

Don't disconnect from your finances

It's certainly a good idea to use auto-pay, because it can save you a lot of time and help you avoid late payments. You just need to be careful that you don't get too hands-off with your money. Even when everything's getting paid automatically, you should keep an eye on all your accounts.