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Posted: 6:00 a.m. Friday, April 5, 2013

Don't put monthly bills on auto debit

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Too often, I talk to people who have allowed a company to automatically deduct money from their checking or savings account each month. It could be a utility company, a health club, a mortgage lender, a cable provider, a cell provider or any other business.

That business may continue to make monthly Automated Clearing House (ACH) debits from your account once your contract with them ends. Giving authorization to regularly draft an account is an open-ended arrangement, regardless of your contract. If you find yourself locked into such an arrangement and you want to get out, try sending my sample letter to stop automatic payments.

And getting that money back can be a grueling process. The problem with ACH payments is that there are no consumer protection statutes governing what happens if you're cheated on purpose or in error.

So what's the solution? Use electronic bill pay that you set up so you can shut it down anytime you want. That's the distinction between e-bill pay and traditional ACH payments. The former you control, the latter is out of your control.

There's a larger problem here, of course: The rules on drafting accounts are set up for the benefit of business with zero consumer protections.

If you sign up with a new company, be sure they only get your credit card account. That way you can dispute any bogus zombie transactions they may try to pull down the road. Look through your bank statements and discontinue any automatic drafts that come out of your savings or checking accounts.

There is, however, one time and one time only when putting your finances on auto-pilot makes sense: When you're contributing money to a retirement, investment or savings accounts each pay period. People don't miss the money because they never see it, so it's much easier to reach your financial goals this way.

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