You may read this title, and think, “What hidden dangers could be associated with paying down my credit card debt?  Becoming debt free is a good thing, right?”  That is a true statement.  Becoming debt free is an awesome thing, but there is something that you need to be aware of: reoccurring payments.  Many people set up reoccurring payments to their credit cards to cover services like the gym, Netflix, Hulu, etc.  That is ok, assuming that you pay these charges off every month.  The danger arises when you pay off the card, stop using the card, but the reoccurring charges remain linked to your card.

I’ve actually learned this the hard way.  Once I paid off my credit card, I moved the reoccurring charges to my debit card – so I thought.  I called one of my service providers to cancel my subscription, but they ended up offering me a couple of months free if I gave them “one more chance.”  Excited about the “free” offer I decided to take it.  The only problem was that I forgot that I did that and never ended up calling back to cancel.  I didn’t remember what happened until I received a notification from my bank telling me that my payment was late.

I asked the bank representative, “How could my payment be late on a card that I don’t use?”  The bank then informed me that I had a recurring charge that was still linked to that account.  Fortunately for me, they waved the late fees and I paid the account.

Even if the card linked to your reoccurring charges expires, you cannot rely on the bank to stop the charges.  This can catch many customers by surprise because if the account is paid off, the card associated with the account is expired, and the new card is not activated one would think that they are covered?  Wrong!  MasterCard and Visa actually offer a service to merchants (MasterCard Automatic Billing Updater and Visa Account Updater) where they will provide your updated expiration date to the merchants to process a reoccurring charge.

Therefore, when you pay off your card, take the time to look through your statement so you can identify all recurring charges and un-link them from that card.  Be sure to look for annual charges as well as monthly.  Also, get in the habit of checking the account every 3 months.  Better yet, make sure it stays linked to your Mint.com account so you can watch for irregular activity.

A little vigilance goes a long way!  Share your lessons with me!

Aisha Taylor is a #1 Amazon Best Selling Author of the book “5+5 FNPhenomenal Ways to Save $100 This Week Without Killing Your Lifestyle”, and the Founder of FNPhenomenal (Frugal –n- Phenomenal). FNPhenomenal helps women to break the vicious cycle of making money, but not keeping it. FNPhenomenal provides education about money management, empowers women to take control of their lives, develop a healthier relationship with money, and pursue being phenomenal.

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