Invisible Psychological Effects
Banks can report automatic bill payment instructions as an indicator of “responsible payment habits.” This can have a positive impact on some credit score algorithms, but this information is not clearly disclosed to most consumers. Users who make automatic payments with a credit card may not be aware of what they are paying, so they may not notice increases in their bills over time. This can lead to significant budget losses, especially when combined with companies' “silent price increase” strategies in annual subscriptions.
Many users continue to make payments without realizing that the service provider is trying to collect payment and “automatically update” the new card information even after canceling the card. This is because card providers have a data sharing system called “account updater” with some large companies.
Advantages – Unseen Benefits
Automatic payment systems can provide additional points or cashback rewards at some banks. However, these promotions are typically short-term and available to a limited number of users; often, users are unaware that the promotion has expired. In the US, some energy and phone companies offer customers who set up automatic payments a discount of $5 to $10 per bill. However, this discount is usually only valid for automatic payments made from a bank account; if a credit card is selected, the discount is canceled.
Some users think that by setting up automatic payments, they are avoiding the risk of late fees, but if they reach their credit card limit, the payment fails and the service provider charges both the bill and a late fee.
Unknown Security Vulnerabilities
Many users do not check their credit card statements for months after setting up automatic payments. This can lead to fraud going unnoticed for extended periods. Some credit card companies leave users completely helpless once the chargeback period expires. In some cases, the automatic payment instruction is linked only to the card number, not the user. Payments continue even if the card is renewed. This situation cannot be detected unless the user checks their account.
Some fake applications take regular payments from users under the name of automatic payments and bypass card companies' fraud filters because they do not display these transactions as “subscriptions.”
User Behavior and Statistics
In a consumer survey conducted in the US, 36% of those who set up automatic payments with their credit cards could not remember which companies they had authorized for automatic payments. Between 2019 and 2024, the rate of “charge disputes” related to automatic payments made via credit cards was 21% higher than manual payments.
67% of users admit that they only check the automatic payment system for the “first few months” and then stop monitoring it. This leads to many unnecessary payments or services continuing unnoticed for years.
Gray Area: Bank and Company Collaborations
Some major banks and billing companies can anonymize and share the data of users who use automatic payments for advertising algorithms. Users automatically consent to this data sharing because it is not clearly stated in most terms of use. Credit card providers consider customers who pay automatically to be “more loyal,” so they respond more quickly to these users' requests for credit limit increases. However, this turns into a hidden system that encourages users to spend more.
The Pitfalls of the Subscription Economy
58% of users who switch to automatic payment systems report losing money at least once a year due to “forgotten subscriptions.” These losses can average $200 per year. Some digital service providers (e.g., VPN, media, gaming platforms) do not offer a one-click cancellation option when you sign up for automatic payments. You have to call customer service or go through several steps to cancel. This delays the cancellation process and leads to extra charges.
Most services that offer a “free trial” do not allow you to try them without setting up automatic payments. When users forget about the trial, they are charged for a paid subscription. Although this is legally debatable in some countries, it is still a common practice in the US.
Technological Limitations and Compatibility Issues
Some payment systems only work with information that matches a physical credit card. Therefore, if your card number changes (e.g., due to a stolen card), all automatic payments are disrupted, and significant service interruptions may occur. However, this information is not clearly communicated to most users. Some billing providers add you to a blacklist if you pause automatic payments once (e.g., due to insufficient credit card limits) and do not allow you to re-enable automatic payments.
Some small service providers in the US perform “manual transactions” for automatic card withdrawals. In such cases, if the payment date falls on a weekend, the withdrawal may be postponed to Monday, and the user may be charged extra interest for the delay.
The Deception of Promotions
Some credit card companies offer deals such as “set up automatic payments and earn 500 points.” However, these points are usually limited to certain types of bills (e.g., only electricity or water bills) and you do not earn points when you add a different type of bill. Some users who sign up for “new customer” promotions find that they are unable to take advantage of these offers shortly after setting up automatic payments. This is usually due to a small clause stating that “the first payment must be made from a bank account instead of a credit card.”
Hidden Issues with Corporate Accounts
For credit cards opened in the name of companies, automatic payment systems sometimes do not synchronize with accounting software. This can lead to double payments, overpayments, or invoices that cannot be tracked. 24% of small businesses in the US report accidentally paying the same invoice from both their bank account and credit card due to automatic payments. The refund process typically takes weeks.
On some business cards, automatic payments are not counted as “pending transactions” when calculating the card limit. This can cause the card to be blocked without the business owner realizing that the limit has been reached.
Real-Life Examples
A user thought they had canceled their gym membership but continued to pay for 11 months without realizing that the automatic payment was still active. Since the bank only offered a 60-day refund period, the user couldn't get back the 9 months of payments. On a popular music streaming service, a user continued to be charged even after renewing their credit card. The reason: The company used VISA's “Account Updater” system, and the bank had automatically updated the card information without the user's consent. This transaction, performed without the user's permission, fell into a legal gray area.
Banks' Deliberate Policies
Some credit card providers label bills with automatic payment instructions as “priority payments.” This means: Even if the credit limit is insufficient, the system processes this payment before other transactions. This can cause some users' accounts to unexpectedly go into the negative. Some banks do not consider automatic payments made via credit cards as part of their “late payment protection” policy. Therefore, if the bill issuer moves the payment date forward, the system still processes the payment according to the original date, leading to a delay. This can negatively impact the credit history.
Some users who set up automatic payments cannot distinguish which service they paid for and how much they paid because the description section of their credit card statements lacks sufficient information. This shows that banks still have serious shortcomings in terms of “transparent transaction reporting.”
Alternative Scenarios and Strategies
Some conscious users intentionally keep their credit card limits low and set up automatic payments on this card. This way, they receive a warning when the payment fails and can determine whether they actually used the service. This strategy is seen as a “controlled sabotage” method that increases awareness.
Some cardholders limit automatic payments to a single service type (e.g., only internet bills). This allows them to establish a regular payment history while continuing to manually monitor other items. This balances security and budget awareness.
Global Differences in Payment Systems
In the US, some credit card companies tolerate delays in the automatic payment system and do not impose penalties for delays of 1–2 days, while most card providers in Canada do not offer the same flexibility. This shows that geographical differences affect the user's risk of paying penalties. In the UK, some energy companies do not offer users extra guarantees for automatic payments made by credit card. If users opt for the “direct debit” system, they are provided with both bill insurance and consumer protection.
In European Union countries, there is a “prior notification requirement” for automatic payments made by credit card. If the user is not notified by SMS or email at least 5 days before the payment is made, they have the right to cancel the payment. This rule is not mandatory in the US.
Lessons Learned from Consumer Complaints
According to complaints filed with the U.S. Consumer Financial Protection Bureau (CFPB), 43% of issues related to automatic payments over the past five years involved “unauthorized charges” and “payments continuing despite cancellation.” Some users reported that they did not use the service during the automatic payment period and requested refunds. However, many providers stated that the “automatic system” was working and that refunds could not be made regardless of whether the service was used or not.
Users reported serious difficulties in the cancellation process, particularly for services offered through mobile applications, as it was not clearly stated where and how to cancel automatic payment instructions.
The Real Face of Refund and Cancellation Processes
Many users have noticed that it is more difficult to exercise their chargeback (refund) rights for transactions made via automatic payments. This is because some credit card companies classify automatic payments as “regular transactions with user consent” and request additional proof during the dispute process. Some service providers apply a “payments will continue until the end of the subscription period” policy to users who wish to cancel automatic payments. This means that even if you cancel the service, monthly fees may continue to be charged to your card.
Most users assume that canceling their card automatically terminates the automatic payment system. However, some providers can continue payments with new card information because their payment systems operate through a “customer account” rather than being tied to a card number.
Overlooked Fee Types
Some credit cards classify bills paid through automatic payment instructions as “prepaid spending” and do not award points, cashback, or miles for such spending. Users later realize they didn't earn anything even though they thought they did. In certain sectors (especially healthcare, insurance, and subscription-based platforms), a “transaction fee” is added to automatic payments made with a credit card. For example, some health insurance plans charge an additional fee of up to 2% for automatic payments, but this information is not clearly stated on the bill.
Some users notice that the amount deducted from their card for automatic payments is 10-15% higher than in previous months. The reason: a plan change or a hidden price increase. However, many providers hide this increase in the fine print of the contract.
Examples of Double-Sided Risk in Automatic Payments
A user set up automatic payments for the same Netflix account for both themselves and their spouse. The system deducted payments from both accounts for four months without being noticed. Netflix classified this as a “user error” and only refunded the last month. In another example, a small foundation fee was automatically deducted from a credit card, but the payment failed because the card's limit was exceeded. The foundation deemed this a “breach of contract” and canceled the membership. The user had to reapply to rejoin.
A user believed they had canceled their subscription service but failed to realize they also needed to close their user account. Since they only canceled the payment instruction, charges continued to be deducted from the card.
Regulatory Gaps and Legal Uncertainties
In the US, there are significant differences between states regarding the refund of automatic payments made by credit card. For example, users in California have stronger consumer protection, while in states such as Texas, more flexible rules favoring companies apply. While PSD2 (Payment Services Directive 2), which came into effect in the European Union, makes “explicit consent” mandatory for automatic payments, many providers in the US still consider the consent obtained during the initial registration sufficient. This weakens user rights in transactions that continue for years.
Some banks refuse to reimburse users for fraud in automatic payment systems, attributing it to “user responsibility.” Users cannot recover their losses unless they take the matter to court. This situation leads to significant losses, especially for users who do not pursue legal action in cases of low-value fraud.