Considering Credit Card Auto-Pay? Here Are 3 Reasons I Opt Out.

Credit card auto-pay is widely seen as one of the best practices in personal finance for those hoping to avoid late fees, interest payments and potential damage to your credit profile. “Never miss a payment!” is just so responsible!

As such, it may come as a shock that I don’t use credit card auto-pay. Never have. And likely won’t ever again. So much so, that I recommend that others avoid auto-pay as well.

Here’s why:
1. Auto-Pay Can Lead to Financial Ignorance & Apathy mes Budgeting may not always be necessary (I no longer budget myself), given fixed costs and unexpected one-off expenses; however, being mindful of where all your dollars are going is important for managing lifestyle creep and inflation. By employing auto-pay, you’re stripping yourself of this knowledge that would otherwise come with monitoring financial activity personally – leading directly to lifestyle creep and personal inflation.

Spending money should be something that you closely track, yet also cause pain. Looking at all those costs add up every month… and over the year… is something that should give pause – and providing that accountability helps prevent ignorance or apathy; I believe this to be one of the main benefits of paying your credit cards manually.

2. Auto-Pay Increases the Risk of Fraudulent Transactions
Banks lose over $24 billion each year to credit card fraud – this amount represents just a portion of what is spent fraudulently from stolen credit card numbers each year. Without regularly reviewing each line item on your monthly credit card statement, how are you expected to identify fraudulent charges that weren’t your doing and dispute them?

Sure, you could go in regularly to review statements while having auto-pay set up or, even better, manually pay and review those statements during each payment session. 😉

3. Auto-Pay May Cause Cash Flow Issues and Overdraft Fees
Auto-pay can provide many advantages when used correctly, including reliable automatic payments that avoid late fees, interest charges and negative hits to your credit report or score. Unfortunately, however, automated payments only work if there’s enough cash in your bank account; otherwise late fees and interest charges as well as potential overdraft fees could apply – creating cash flow issues and potentially bank overdraft fees that compound.

My net worth is high; however, my bank checking account balance is quite low due to virtually zero interest. Each month, I need to move money between financial accounts in order to pay off credit card bills; using auto-pay allows me to simplify this vital cash management process.