Pay attention to your electronic payments

08/21/2012 11:49 PM

05/16/2014 7:25 PM

Paying bills electronically sounds so foolproof. You have no checks to write, no need for envelopes and stamps, and no late-night drives to an out-of-the-way post office to drop a bill in the mail to avoid late fees.

But that doesn’t mean the service is glitch-free.

Whether you’ve authorized companies you owe to automatically tap into your checking account or set up regular payments through your financial institution or a retailer, putting your “bill paying on autopilot doesn’t mean you shouldn’t pay attention,” said Curtis Arnold, founder of CardRatings.com, a consumer-oriented credit card website.

It’s especially important for younger consumers to heed that message. While they’re likely to be more comfortable and trusting of Internet banking than their parents, they may not be as engaged in the finer points of checking their bank statements regularly for errors.

I recently learned from a friend what can happen when there’s an electronic billing mistake.

In this case, one mistyped number — perhaps an “O” instead of “0” — caused a credit card bill payment to be rejected.

Everything was fine at first. The payment was processed in late June. But 10 days later, the department store voided the transaction. That led to a flood of late fees and interest charges.

What made it worse was that the problem played out over two billing cycles. There also was no immediate call or notification from the bank or the retailer to alert my friend.

Once he received his credit card statement in early August, he contacted the retailer’s customer service department and the charges were waived. It was an honest mistake probably caused by typing an incorrect routing number, the customer service agent said.

Financial institutions and businesses are pushing electronic payments, touting the service as more efficient and more convenient than writing a check and sticking it in the mail. This year, electronic bill payments are expected to account for about two-thirds of all transactions, according to a report from First Data. So there’s plenty of potential for things to go wrong.

What can you do to head off problems?

Arnold says the safest method is to authorize the funds to be automatically withdrawn from your checking account. That gives you more control over the transaction than using a store’s bill-paying service.

“There seems to be more potential for mistakes when you add a third party,” Arnold said.

As with any payment, pay on time. Don’t wait until the due date to pay the bill, in case the transaction doesn’t clear until the next day, said Bill Hardekopf, editor of LowCards.com.

Even with electronic payments, nothing is really instant. Add an extra day or two before the actual due date to dole out the funds.

Finally, maintain a paper trail. Make sure you receive a payment confirmation email. Most companies offer this service, but it’s also a good idea to get the old-fashioned statement in the mail as backup.

Review it and keep the copy in a file, at least until your monthly bank statement arrives and everything balances out.

After all, it is your money.

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