Fine print, Living with credit, Protecting yourself

My budget got run over by an automated auto loan payment

Sienna Kossman

Last week marked my second month of auto loan repayment, a $130 checking account overdraft and a three-day long financial headache.

My second auto loan payment of $203.67 was due Dec. 10. On Dec. 9, I called my lien holder to make a payment over the phone. However, the customer service representative said that making a payment over the phone would cost an extra $20. For no additional charge I could mail in a check or pay through my checking account’s bill pay system, if I had that option.

Mind that I paid over the phone for no additional charge in November. I decided I would just make the December payment through my checking account online. Within five minutes my loan payment was made, free of additional charges.

The tale of my first auto loan headache

All was good, or so I thought.

The next day I logged onto my bank and found that the auto loan payment I set up through my checking account was pending, but so was an automatic payment withdrawal by my lien holder for the exact same amount, which had sent my checking account balance into the red.

The week before I had already moved money out of my checking to pay other bills and credit cards — as that’s what I use for day-to-day expenses each month — so I had left just enough for one auto loan payment and an extra $75 in my account on Dec. 10.

In a panic, I called my lien holder, who told me that they only saw the auto-withdrawal made on their end and could not give me a straight answer as to why I was enrolled in automatic bill pay. I was told to call my bank to see whether there was another payment going through.

Phone call No. 2 wasn’t any more helpful. The bank customer service rep was also confused and all he could reveal was that the lien holder’s auto withdrawal was out of his control and he could not cancel the pending payment I had set up the day before. If anything was to be resolved, all the payments had to clear first.

Two days later, after numerous phone calls and a series of angry Tweets, I finally had some answers.

Here’s what I found out:

  • My auto lien holder enrolled me in automatic bill pay for five months after I made my first payment over the phone because apparently that’s a policy for new loan holders.
  • I could not cancel the manual loan payment I made through my online bank account because it goes through a third-party payment provider and once I press “submit,” my bank pays that service provider and can’t get the funds back.
  • In the end, I couldn’t get either one of the payments returned to me but one was applied to my January auto loan bill and the automatic payment withdrawal for January has been “suspended.”

In the meantime, I was able to borrow a little money from a friend to temporarily mend my bank account and get me back on track. I’m still frustrated and wish I had more answers, but my lien holder insists I’m the one who made an error and my personal bank can’t do anything else to help.

It was an unpleasant experience, but I did learn a few valuable lessons about dealing with banks and repaying debt:

1. Venting frustrations on social media can be helpful.

After the first round of unsuccessful calls to my local bank and my car loan lien holder, I logged onto Twitter and tagged the financial institutions in a couple strongly worded tweets, venting my agitation and stress about the situation.

Within 15 minutes I had a response from my bank requesting I direct-message them and explain my situation again. I soon received a phone call from Amy, a social media customer service specialist with my bank who has been by far the most helpful person throughout the payment ordeal.

Amy thoroughly explained what was happening and why, was sympathetic and actually listened to my side of the story. She proceeded to monitor my account and make follow-up phone calls to me over the next couple of days to make sure I wasn’t facing any additional costs. Considering that the bank charges a $35 overdraft fee for each day an account is overdrawn and a $65 returned payment fee, she saved me at least $130 in all.

2. Manual bill pay is worth the extra time it takes if you’re on a budget.

The idea of automatic bill pay is great. Set it and forget it. It couldn’t be easier, right?

Well, when you’re on a tight budget, automatic bill pay doesn’t give you much wiggle room for mistakes — or ways to fix them.

If there is an option to fix something, in most cases — according to both banks I was dealing with — the payments have to be processed first before anything can be done. For me that meant overdraft charges and a threat of returned payments.

After last week, I think I’d rather spend extra time each month manually paying bills so I control what money is leaving my accounts and when.

3. Emergency funds are important.

I don’t have the budget for surprises, which brings me to my next point: Having an emergency fund is crucial, no matter how broke you are.

Between student loans, post-college living expenses and now an auto loan, my budget is really tight. I make it work and track all my bills and expenses on a spreadsheet each week, but I quickly discovered I was not prepared for incidents such as last week’s double loan payment. I had already paid the rest of my bills for the month, moved money over to pay credit balances and thought I was set until my next payday. Wrong.

My only financial cushion was credit cards, which was not helpful in this particular situation surrounding my checking account and that’s not a practical financial safety net in general.

As a result, one of my new financial goals for 2015 is to establish an emergency fund of $1,500 in my savings account that can come to my rescue if something like a double bill payment– or worse — is thrown my way again.

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