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Why I’m Skittish Around Automatic Billing: Dreamhost’s Big Screwup

If I was feeling petty, the subtitle could be “Why Dreamhost Sucks,” but I think it’s bigger than that.

Some of you are fans of automatic billing. I certainly think it sounds like a nice concept.

However, there’s a big reason why I don’t want it–human error. I know it’s supposed to help us avoid the human error of forgetting our bills or the human effort of paying them. The thing is, I don’t trust companies to bill me correctly…I want to be able to check it before I send it.

This morning, for instance, I received a bill from Dreamhost. It told me that my account was overdue and I needed to pay them. I wasn’t too worried because I saw that it seemed to think we were in January 2009 and it said the charges were incurred in November 2008. So I sent them a lil’ e-mail saying approximately “Umm…WTF?”

Apparently one of the Dreamhost workers doing billing for Dec 07 accidentally put in 08.

I’m one of the lucky ones. Some people’s sites went down because the system thought they were overdue and outside the “grace period” that I was still in. As for automated billing–you can set your site to auto-renew with your debit or credit card info. Some people apparently got majorly screwed.

Total damage of the error: $7.5 million!

One customer wrote:

Thanks, you just put me overdrawn for the month.

£80 I now have to find.

Another said that he’d lost all his credit card rewards and another was worried about the effect the overdraft would have on her interest rate. Another person’s mortgage payment is going to bounce because there’s not enough money for both in his account right now!

Not good at all.

Some people say that this is an issue from using cheap hosting. While there are certainly problems with using a cheaper host, I think this is plain and simple human error–something that people at the biggest companies could have done if they were up late too. Unless their program wouldn’t allow it (I hope that Dreamhost will be changing their software not to allow billing based on future dates).

I’d much rather just review the bill myself than go through the hassle of reversing the charges.

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Becky January 16, 2008 at 1:39 pm

Yikes! I agree.
I’ve also had the problem of calling and cancelling a service, but the company doesn’t stop the automatic billing. It’s really hard to get your money back once they have it! I am now also very skittish of automatic billing and avoid it whenever I can. I’d also rather get the bill and pay it on my credit union’s billpaying site!

plonkee January 16, 2008 at 2:46 pm

In the UK, we have a direct debit guarantee just for these sorts of circumstances which means that if say, Dreamhost stuff it up, you can go after your bank for the money, and let the bank get the money from Dreamhost. It also means that you can cancel autopay with your own bank – you don’t have to go to the company concerned

I’m fortunate in not having had any problems with direct debit that have been outside my control, and I am so bad at paying bills on time, that it’s much cheaper for me to do it this way.

Ian Denny January 16, 2008 at 4:32 pm

It’s amazing how the people who control finances within the company throw resources instantly at collection, and conversely deny assistance to customer service.

When a company grows beyond a certain size, and becomes let’s call it “big”, the original ethos and early days enthusiasm that made the service great as they grew turns from an investment into a cost.

The flat structure becomes hierarchical. The creativity is stifled by internally-focused systems. The customers become numbers rather than people.

The staff become stale instead of fresh.

Mistakes are paid for by clients rather than the company.

And so starts the cycle of decline which sparks a review and a short-lived impetus on service.

Tom January 16, 2008 at 5:09 pm

Actually, I was one of those who was affected by Dreamhost. Yes, it was a HUGE total number, but the overall effect on individuals shouldn’t have been that bad (I was billed for 3x what I should have been billed for – about $550 total).

I don’t mind automatic billing, but I NEVER give out my checking account information to ANYONE EVER!!! This simple rule has kept me safe for almost 10 years now. All automatic billing is done to my credit cards only. Even if the charge exceeds your credit limit, a simple call to the credit card company explaining the issue and requesting a chargeback will take care of the problems.

Best Advice on Debt January 16, 2008 at 5:27 pm

What concerns me are some of the examples you give. For instance, “Another person’s mortgage payment is going to bounce because there’s not enough money for both in his account right now!”

Wow, if a guy can’t make a mortgage payment because he’s getting charged a little extra for his hosting, he seriously has his priorities screwed up! He obviously has too much house or needs to get a second job.

That’s the scary part to me!

mrsmicah January 16, 2008 at 6:16 pm

I can imagine someone having just mailed the mortgage check, not having enough coming in and wondering if the money transfer from another account will come in on time.

Or someone isn’t in a great monetary situation, but may have planned things out so that he’d have enough to pay the mortgage. Some people report being charged around $1000.

fathersez January 16, 2008 at 6:26 pm

Wow! All this because a guy who typed an 8 instead of a 7?

The machines have really taken over.

I went over to the Dreamhost link that you provided, and they have a whopping 561 comments…some in support, many really upset.

There was a comment that people might end up paying higher interest rates on their cards FOREVER because of this???

RacerX January 16, 2008 at 8:23 pm

I am old fashioned I know but I personally like to Pay something. The whole thing can get a bit video gamey (new word!)otherwise for me. Easy to lose sight that it is real money changing hands.

Eden January 16, 2008 at 9:31 pm

I rarely use automatic billing either- in case of the human error factor, though I do happen to have auto billing set up with my Dreamhost account. Funny thing is, I didn’t open the notification email and only found out about the problem when they sent an apology. I was billed for a year of service, but I have a large enough buffer in my checking account that it didn’t affect anything. They quickly found the error, however I would also say I’m not surprised that Dreamhost screwed up- they never come across as very professional, which is one reason I moved my blog to Media Temple. I use Dreamhost for several small sites because it’s cheap, but I don’t trust them with anything too important.

ms. m&p January 16, 2008 at 10:48 pm

How awful. If that had happened to me, I would have been screwed–especially if it had happened a year or so ago. I feel for the paycheck to paycheck people that got hurt by this.

Laura January 17, 2008 at 8:55 am

I have separate account for my necessary things(housing, food, bills) and another for everything else. If an error happens it minimizes the damage. I only had one mistake, but I learned from it and separated the two categories.

Katie January 17, 2008 at 9:35 am

I signed up for automatic bill pay 4 years ago when I moved to Europe. It was definitely an easier route than waiting for the bills to come overseas, writing a check, and mailing it back. My banks bill pay system is still sent via check… its just the bank sends the check instead of me.

Luckily, I have never had any issues such as this occur. It is a scary thought.

Llama Money January 17, 2008 at 11:07 am

I’ve always stuck to automatic credit card billing. Much, much safer – you have more time to figure out an error, and of course you’ll never miss paying your mortgage / car payment because of it.

Automatic debt to a checking acct is a bad decision 99.9% of the time 🙁

vh January 17, 2008 at 6:56 pm

Wow! That’s a real charmer.

And it’s exactly the reason I decided not to let GoDaddy “automatically” recharge its fees to my credit card. In fact, the only automatic charge I have on a credit card is the New York Times subscription, and that only because they have a long history of not scr**ing up with me, and because it’s a very small amount.

I do have automatic bill paying for all my utilities. These come out of a checking account, though, and the payments are timed so that every time they’re due two paychecks have gone into that account. Also I keep a $500 “cushion” in that account AND have $500 of overdraft protection–together those create a $1,000 back-up, which should (I hope) forestall any bounced payments, should anything strange happen.

I’ve never encountered a credit-card issuer, no matter how eminent or how long in business, that I felt could be trusted. They’re all out to get the consumer, one way or another, and if you talk to folks you’ll find that just about everyone gets bitten sooner or later. That’s a good reason not to have any charges automatically going on the card–you really need to stay in control with those things.

Alison January 18, 2008 at 12:06 am

I’m a bit afraid of automatic billing when it’s tied to my checking account, I just don’t keep a lot in there because it can earn more interest elsewhere. I only do automatic billing if I can use my credit card.

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