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This is why you’re broke, auto pay edition

Like Wile E. Coyote and those canyon walls painted to look like a wide-open road, I can never seem to stop falling into the auto pay trap.

In theory, it’s great; having monthly subscription fees automatically debited from your checking account is so convenient it’s almost invisible, especially for smaller charges. But therein lies the problem for me: Even if I never use it I’ll wait much longer to cut back or cancel a service that’s auto pay compared to one where I actually have to log on and pay by hand, or God forbid, mail in a paper check.

Confession time: I recently sent back two Netflix DVDs that had been sitting in my house for four months. Four months!

We pay $12 a month for the two-DVD plan at Netflix. That means I paid a sickening $48 to hang onto those DVDs for Netflix, and the worst part is, we only ended up watching one of them!

Think about how crazy that is for a second. If someone walked up to me in the street and said, “Hey bro, you want to pay me $48 to hold on to these old movies that you don’t even really want to watch for four months?”, I’d tell him to go to hell. But because it was auto pay, I just blissfully kept on paying for those DVDs to sit there and gather dust.

The same thing happened to me with my Xbox Live account. Now, I love video games, but I haven’t had as much time to play them lately. Because of that, I planned to cancel my Xbox Live Gold account, which costs about $8 a month, a few months ago. But wouldn’t you know it, I didn’t get around to it until I’d already auto paid for another month twice.

It’s no accident that companies often offer lower prices to those who offer to set up auto pay. Inertia — the tendency for objects at rest to stay at rest and objects in motion to stay in motion — works powerfully on humans. That’s why experts in behavioral economics say companies should automatically enroll employees in their 401(k) plans; even if they don’t care about saving for retirement, they’re unlikely to go through all the trouble of quitting the plan.

That’s a positive for people’s future retirement, but it’s also the danger of auto pay — that you’ll continue paying for something long after you no longer want or need it just because you can never quite overcome inertia and cancel it.

Sure, we’re not talking about huge sums of money here, but left unchecked, these auto pays can become like drips from a faucet, slowly adding up to buckets of cash that I could have spent on something that I actually wanted, or even better, saved for the future. That’s why I’m trying to get better about turning off auto pay when I decide I no longer want a service, instead of waiting to see that annoying charge show up on my debit card statement before following through.

What do you think? Do you ever leave an auto pay going long after you’ve stopped using a service? Or is it just me?

(Photo: Flickr user ozcast)