Automatic Bill Payment
Many of us are taking advantage of the automatic bill payment option that some banks offer in order to help us automatically pay our bills. The main advantage of automatic monthly bill payments is paying bills on time. Once the automated payment is scheduled, we can rest assured that we never miss a payment again unless the bank systems fail to properly function which could sometimes happen.
There are usually two types of automated bill payments. We might choose to receive electronic account statements and ask the online banking system to pay the account in full every month such as utilities bills, cell phone bills, etc. Or, we might schedule an online bill payments for large account balances in which case only the minimum payment or a fraction of the account balance is paid. Such accounts may include credit card accounts, Home Equity Line of Credit (HELOC) accounts and others. In such cases when we can not afford to pay the entire balance in full, we have the option of paying smaller monthly amounts until the balance is totally paid off.
The focus of this article is mainly on the automatic bill payment of accounts which are not fully paid each month but rather a small payment equal or greater than the required minimum payment is paid each and every month. The risk associated with such accounts which are paid in small amounts over an extended period of time until the account is paid off is that consumers may overlook the account transactions which they don’t expect. If consumers have maxed out on the available credit of certain accounts or if they selectively and rarely use some of their available credit accounts such as a HELOC, they might not expect any new transactions and therefore may not review the account statement each month while fully trusting the automatic bill payment process to pay the pre-selected monthly payment amount. The risk focus here is not so much about not paying bills on time and consistently although late payment is a risk, however, the concerned risk here is not noticing potential unauthorized transactions which may go undetected for a long time until either the account transactions and balances are reviewed or the bank contacts us and requires additional payment because the unauthorized transactions have raised the minimum monthly payment requirement which has not been met due to the pre-scheduled and lower automatic bill payment amount.
In conclusion, all accounts must be diligently reviewed to detect and follow up on unauthorized transactions. The additional benefit of an account review is also to ensure that the monthly payments are being properly processed by the bank and credit is applied to the account. The account review rule also applies to accounts with zero balances. Just because we assume that the account balance is zero and no new transactions have incurred doesn't mean that no unauthorized transactions are posted to the account. The sooner unauthorized transactions are detected; fraud charges can quickly be reported, investigated and recovered while the target account can be flagged, frozen or closed to prevent further fraud. A few ways to review account transactions quickly include daily review of account activities online and receiving account activity alerts when transactions occur online, by phone, via snail mail, or from overseas.
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