Consumers use debit cards for automatic payments as an easy, hands-off way to get bills paid on time without adding to a credit card balance. Debit cards issued by your bank typically rely on your checking or savings account for funding, although some debit cards receive funding through a prepayment arrangement between you and the card issuer. Normally, if you cancel a card before the date of the automatic payment, the card issuer will not honor the payment.
Backup Payment Method
If you specified another way to pay the automatic bill, the company will charge that account before adding fees for nonpayment. Once your debit card company refuses the payment, the payment will roll over to the next listed account. If the company debiting your account does not allow a backup payment method or you have not specified one, you may owe additional charges when your debit card company declines the payment.
Stop the Transaction
Contacting the company and specifying a new way to make your automatic payment before canceling the debit card prevents the payment from being rejected. For example, Verizon Wireless offers customers the ability to suspend a payment for up to four days or change a payment method on its website. However, the method for stopping or changing your payment method depends on the company receiving the payment. If your financial institution has already refused the payment, you may owe late fees for nonpayment plus declined payment charges.
In addition to additional charges, you could lose the service that the automatic transaction pays for if your card company declines the payment. Fast Usenet, for example, states that its policy is to disable accounts within 15 minutes after midnight of the payment due date if the payment is declined. Some companies require that customers pay any past due amounts, a reconnect fee and a deposit if they discontinue a service because of nonpayment.
If you forgot to change your payment method before canceling your card, you may be able to talk to the company and your financial institution and have any charges reversed. However, if you have a history of declined payments -- also known as bounce fees -- the companies may be less willing to work with you. Declined payments do not show on your credit report, but if you do not pay the account, the company can give the account to a collection agency. This will result in derogatory information on your report and lower your credit score.
- Jupiterimages/Pixland/Getty Images