4 Autopay Settings Parents Should Check Before Back-to-School Spending Hits
Autopay makes life easier until a busy spending season reveals the settings parents haven't looked at in a while. Before school shopping hits on top of other bills, a quick review of your recurring payments can help prevent cash flow problems, unnecessary interest charges and budget surprises.
Here are four autopay settings parents should check before back-to-school spending makes a comeback.
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Credit Card AutoPay
The autopay setting that deserves the most attention is your credit card payment, according to Ralph Estep Jr., licensed public accountant with more than 30 years of experience and founder of Saggio Management Group.
He said many people never check to see if they’re auto-paying "the minimum payment, the full statement balance or a fixed amount." It feels responsible because payments are on time and your credit report looks good, but it can turns a seasonal expense into a long-term one.
For example, he said, if you charge $900 in August and only pay the minimum, you could still be paying for those school backpacks in March at 24% interest.
Account Verification
Even if your autopay amount is good, it can still create problems if payments are pulling from an old checking account or hitting before payday. People should look at the source account for each payment to locate where it's coming from, he said, since people may change banks or link a payment app and forget to update their autopay settings.
“Make sure none are linked to an expired card, a card replaced after fraud or a card that now belongs to a child in college," he said.
He also recommended scheduling every fixed payment for the two or three days after you get paid, not before: “This doesn't change your budget, but it helps you avoid running low on money each month." Fortunately, almost every company will let you move a due date if you call and ask, he added.
Annual Subscriptions and Renewals
Monthly subscriptions may get attention, but annual renewals often fly under the radar until they suddenly hit during an already expensive time, like back-to-school season.
Some common examples he sees in his work are kids' app and game subscriptions bought with a family payment method, cloud storage that upgraded automatically, extra streaming services added for a single show, free trials from last back-to-school season that turned into paid subscriptions and old identity-protection or antivirus subscriptions that have been renewing for years.
He offered a practical test: "Look at three months of statements and circle every charge between $5 and $20. If you can't say what it is within five seconds, you probably aren't using it."
Seasonal Bills
Some bills autopay at intervals somewhere between monthly and annually or even every couple of years, such as insurance renewals, taxes and school activity costs. These can often stack together, creating temporary cash flow problems right when it’s time to shop for school supplies, even for families with solid budgets.
"Each of these payments is manageable on its own," Estep Jr., said, but become a problem when they land all at once.
Pro Tip: Separate Bills From Everyday Spending
One of Estep's favorite budgeting systems is to use two checking accounts — one dedicated to fixed bills and another for everyday purchases. That allows families to enjoy the convenience of autopay without accidentally spending money already earmarked for monthly obligations.
"The balance in your spending account is real, it's what you have left after bills, so you don't have to do mental math," he said.
Pro Tip: Know Which Bills Should Stay on AutoPay
Not every recurring charge deserves the same treatment, however. Estep recommended keeping essential bills on autopay while paying discretionary subscriptions manually.
Here are some guidelines for which bills to keep on autopay:
Mortgage or rent
Insurance premiums
Utilities
Any bill where being late would cause more harm than the amount of the bill.
Create a Back-to-School Sinking Fund for Next Year
The smartest autopay strategy is to create what Estep Jr. called a “sinking fund” to automate a small monthly transfer into a dedicated savings account. This enables families to spread predictable school expenses across the entire year instead of absorbing them all in August.
Given that K-12 families will spend about $890 this year on school supplies and college households about $1,367, according to the National Retail Federation, he suggested using a rough amount of $900.
"That amount is tough to handle if it all comes in August, but it's only $75 a month if you plan ahead," he said.
Autopay Review
To stay on top of these issues, schedule a twenty-minute autopay review twice a year, he said. Do one in July before school spending begins and another in January after the holidays, when any problems are easiest to spot. "Just forty minutes a year can make a big difference,” he added.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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