Setting up automatic payments on your credit cards and other accounts is a good idea. In fact, I just set my own Paypal Mastercard to auto-pay so that I don’t have to worry about slow mail delivery.
However, there are two possible “gotchas” that can catch a person off-guard and create a late payment on the credit report.
I don’t want this to happen to you!
Two Tricky Traps of Automatic Payments
You should not be charged a fee for setting up automatic payments.
- If your account is sold to a new creditor and you don’t reset the auto-pay with your bank, your payment can become “late.”
That’s what happened to someone who had a student loan. They never told him they transferred to a new student loan servicer, so his auto-payment never went out, and the new company reported him as late.
- If your pay date happens to fall on a holiday, your payment might go out “late.”
Check the system with your credit to make sure you have at least 3 days’ buffer or that the funds will transfer even if your bank is closed for the holiday.
Even if you have auto-pay set up, review your accounts to ensure all is as it should be. Then you will have peace of mind and know you are establishing a great credit profile that you can be proud of.