Automatic payments do ease our daily lives. From leisure and travel, to rent and educational services, automatic payments are an option in every sphere of life. But still, one must pay careful attention, and monitor them, prevent fraud, or simply keep finance in order. In this Maxpay article, we explain how automatic payments work, and how to stop them if needed.
How an automatic bill payment works
An automatic payment is a payment that is taken from the regular or online bank account automatically every payment cycle with a single authorization in the beginning. Basically, there are two ways an automatic payment service can be set up.
The first one is through the ACH transaction which is a type of electronic money transaction. ACH is short for Automated Clearing House transactions. It is a banking financial network that is created in the USA for electronic transactions and money transfers. In the case of automatic payment, a customer informs the bank about the transaction amount and its frequency. Then the bank authorizes the transaction money to be taken from the customer’s account and transferred to a merchant.
The second way to create an automatic payment is to rely on the credit or debit card directly, both Visa or MasterCard. With this type, a customer gives to a merchant all the billing details and the right to take payments from the account with an agreed frequency.
How to manage your automatic payment
- Payment cycle calendar. Billing calendars and reminders are good to help as a notification for an upcoming payment.
- Track of bills. We recommend keeping track of both payment histories, the one that is automatic, and the regular one in order to be able to calculate the expenses easily.
- Balance notifications. Another piece of advice is enabling banking alerts for the low balance to avoid the possible minus on the account.
- Payment notifications. It is still useful to be notified when exactly the payment is taken even if it is a repetitive one.
- Verification of the account. We strongly advise you to check the bank account connected to recurring payments often in order to spot suspicious payment activity.
- Update payment information. When changing the payment card, it is needed to remember to also update the billing data for all the recurring payments.
Be cautious about giving anyone your bank account information
No matter the popularity of recurrent payments, fraud is always out there. The most common danger with automatic payments is the effect of being not noticed. Some fraudsters use it as the opportunity to withdraw money from a lot of subscribers within Europe, the UK, and other EU states like Spain, for a long period of time.
Usually, it works this way. A customer is getting some kind of an email or a message that is pretending to be quite valid and legal or at least looks like a letter from the service that a customer is already subscribed to. In this message, there is a request to update payment data or any other reason for a customer to give away personal billing data. After fraudulent persons obtain this data they ‘subscribe’ to this account to little frequent payments that would not drive much attention.
To prevent such action, never give away any personal data, no matter what the reason is. Remember, that real legal company or bank would never ask you to do that. So the only person or organization that could is the one that aims fraud.
Ways to stop automatic bill payment from working
- Contacting a merchant. The first option is to contact the company directly with a request to stop recurring billing.
- Contacting a bank institution. The second option is to do the same action but through the personal bank.
- Canceling the payment via a bank institution. And at last, there is a manual option in the banking to stop recurring billing which orders a bank not to allow a merchant to take further payments.
What are automatic payments?
Automatic payments are recurrent payments. With these, a customer allows a merchant to take money from an account with a requested frequency without authorization afterward.
How do I stop recurring payments?
There are three ways: to contact a merchant, a bank, or do it manually on the banking app or website.
How do I stop automatic direct debits?
Same as any recurring payment, sending a request to a merchant, bank, or give the bank a ‘stop order’.
How much does it cost to stop an automatic payment?
Depending on the payment type, and also on the banking services. Some payments are free to cancel, and some ‘orders to stop’ may have extra charges.