Automatic payments are sure to simplify your financial life. You can reduce your risk of late payments and fees, and some lenders will even give you a discount if you sign up for autopay.
However, the convenience of automatic payments also has a downside: you may unknowingly pay for services that you no longer use. In fact, a Self Financial study found that people spend nearly $400 per year on unused subscriptions.
So if you have multiple recurring payments that you want to put an end to, how can you stop the automatic payments from your bank account?
With automatic payments, you authorize a company (such as an Internet service provider, a student loan servicer, or a gym) to debit money directly from your checking account on a set date each month. For example, your utility company can automatically deduct $100 from your account on the 15th of each month to pay your bill.
There are several benefits to signing up for automatic payments:
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Avoid late fees: Missing a bill or loan payment often results in high late fees. By setting up automatic payments, you eliminate the risk of forgetting a payment and incurring unnecessary costs.
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Improve payment history: Because your history of making on-time payments on loans, credit cards, and other bills accounts for a large percentage of your credit score, enrolling in autopay can help build and improve your credit.
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Possible savings: Some lenders give borrowers an interest rate discount if they sign up for automatic payments, typically from 0.25% to 0.50%. Over the term of your loan, you can save hundreds of euros thanks to this discount.
Despite the benefits of autopay, there may be times when you need to pause or cancel autopayments. For example:
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You decide to cancel a service: Whether you are unhappy with a subscription or simply want to cut costs and save money, you may decide to cancel a service or membership. For example, if you don’t use a particular streaming service, you can save between $10 and $25 per month by canceling that subscription.
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You have closed your bank account: If you’ve changed banks, you’ll need to stop automatic payments from the original bank account and sign up for automatic payments with your new account information.
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You have switched payment methods: Sometimes it doesn’t make sense to use your bank account for automatic payments. For example, if your credit card has a valuable rewards program, using your card may be a better choice. Additionally, some credit cards offer statement credits for certain types of subscriptions, such as streaming platforms or rideshare memberships, so it can be a smart idea to use your credit card instead of your bank account. If you need to switch payment methods, you will need to stop automatic payment from your bank account and update your account with your credit card information.
Read more: Closing a bank account: a step-by-step guide
Whatever your reason for stopping automatic payments from your bank account, you can pause or stop automatic payments with one of the following options:
1. Log in to your account and update your payment information
The easiest way to stop your automatic payments is to log into your service provider account. Once you sign in, go to the billing section and turn off automatic payments or update your payment information.
If you are unable to cancel automatic payments online or you are concerned that you have not been successful, please call the service provider’s customer service department. Explain that you want to stop automatic payments and ask for an email or written confirmation that automatic payments have been turned off.
For additional peace of mind, contact your bank or credit union and let them know that you have revoked your authorization for automatic payments. They may have a form for you to fill out, but you can use this sample letter from the Consumer Financial Protection Bureau to get started.
Be sure to update your payment information to avoid missing a payment and incurring late fees. It’s a good idea to check your bank and credit card statements to make sure the company has followed your instructions.
If you’ve requested an automatic payment be stopped but you’re still being charged, you may need to escalate the issue. You can file a complaint with the Federal Trade Commission and your attorney general.
No, closing a bank account does not end automatic payments. The service provider continues to debit money from the account; Closing the account means payments will not go through and missed payments will be reported to the major credit bureaus. Additionally, you will likely be charged late fees. To properly terminate automatic payments, you must contact the service provider directly.
Read more: Does closing a bank account affect your credit score?
Stopping a payment order is different from simply canceling an automatic payment. It is a formal request to a financial institution to cancel a payment or check before it is debited from the account. This action may make sense if you are the victim of a scam or an unauthorized transaction and want to cancel the payment before the other party can receive it.
Read more: 7 common bank frauds and how to avoid them
If you cancel an autopay (and don’t set up new autopay information), you risk missing future payments. As a result, you may see your credit score drop. And if you qualify for a discount thanks to automatic payment, you lose the interest deduction.
If you’re trying to get a handle on your subscriptions and memberships and limit your spending, bill negotiation apps may be attractive. These services check your bank and credit card statements on your behalf and identify recurring payments. In many cases, these services can also cancel recurring payments for you upon request.
These apps can be useful ways to save money, but there’s a catch: depending on the platform, the service can take 40% to 50% of the amount saved as payment.
