Automate your payments? Automate your life. Put everything on autopilot and just sail on up that river. Sounds convenient and easy, doesn’t it? Yep. That’s what they want you to think.
I have to admit that automatic payments can make your life easier if, and this is a big if, you are organized and able to keep your bank account at a respectable balance.
Millions of people are living paycheck to paycheck. As soon as the paycheck goes into the bank, most of the money is drawn out to pay bills and living expenses. It’s hard to set aside enough money to get your bank balance built up. While automatic payments are due at the same time each month, it’s often a race to get that paycheck deposited in time to cover the auto payment. And overdraft fees are enormous, often going from $30 to $50.
Another problem with auto payments is that it can be difficult to get automatic payments stopped. I’ve heard of several people still getting charged after they cancelled a service. My son got charged for two months after he moved and cancelled with Comcast. It caused his bank account to be overdrawn and was a whole lot of headache trying to get reimbursed. Fitness clubs and credit card companies are also notorious for continuing to withdraw after a request to stop.
If you are paying off a delinquent credit card bill, you should never give them direct access to your bank account which is what you are doing with automatic payments. If your debt has been sold to a debt collector, never give them direct access to your bank account. They have few qualms about trying to deduct the entire amount from your account.
So what can you do if you want the convenience of automatic payments but not the headaches? You can click it! It works like this: you set up an account to pay your bills online, you provide all the information to pay the bill, just like when you are setting up an auto pay, but instead of them automatically taking the payment out of your account each month, you have to click a one-time payment button.
This is auto bill payment where you have the control over when you pay. I have all of my accounts set up this way and most companies offer it as well as automatic payments, they just don’t tell you about it. I get an email statement each month with a due date and when I get ready to pay it, I just click, and it’s done. In most cases, the payment comes out of my bank account almost instantly. It’s easy, convenient and the company doesn’t have access to my bank account. And like auto payment, most companies don’t charge for the service. As with auto payments, you are still going green and saving the cost of stamps and envelopes.
Of course, you still have to be organized and pay your bills on time. I like the fact that I am emailed a statement at least a week before the due dates of my bills. This is a good reminder and I often pay them as soon as I get the email.
You always have the option of using the good old US Postal Service. The cost of a stamp is still a good deal when you consider the cost of transportation nowadays and envelopes are really not that expensive. Many companies provide return envelopes anyway. But if you wait until the last minute to mail in that payment, you are risking a late charge. We all know that the postal service isn’t the most reliable source around. If you incur too many late charges with credit card payments, you risk having your interest rate increase. Also, late payments can make a big impact on your credit score, especially late mortgage payments.
Automatic payments are a tool, just like your computer is a tool. If you like the convenience and ease of automatic payments and don’t have a problem with keeping enough money in your bank account, then I must applaud you. If you are like me and your account runs close to dry between paydays, I urge you to try the one-time payment method of auto payments. It’s the tool I recommend.
So which do you prefer? Lick it or Click it?
I prefer online bill paying through my bank. I pay all the bills I can with it. In order to earn interest on my checking account, I have to have one bill set up to be paid automatically each month. All the rest are paid only when I decide they are paid.
I still use paper checks for a couple of bills a month. One of those doesn’t accept online payments, and the other (our van loan) contains extra money to go toward the principal. I like to add a handwritten note to that one so that I’m sure the funds are directed as I intend.
I like paying everything by mail.
I’m with Julie, I like seeing the money go through my hands and knowing that I paid that and not relying on a bank.
I pay most of our bills through online banking, but they are set up by me each month. I do not have any set up to go automatically, even though that is an option. I save on the cost of stamps and I know exactly when the money will arrive so it’s never late (dependent on the USPS).
Good point — although I suggest telling anyone who is trying to draw out of your account to f*ck off if the withdrawal is unauthorized. If it’s not their money, why are they trying to draw it? In a very strong language, threaten them. Tell them you’re a search engine optimization specialist, and if they don’t budge, theircompanysucks.com is going to be the very first site people see on google. Works every time.
The problem with automatic payments is the same with paying for clothes with a credit card: you’re emotionally separated from the pain of spending. When you hand over cash or have to write out a check (or manually process a bill online), you’re feeling the pain of the expense.
When you feel the pain, you’re likely to spend less or at least revisit the necessity of the expense.
I like to pay bills online through my credit union, assigning the date each month because I’m paid every 2 weeks so the money is not always there on the same date.
Two warnings: I used to receive all my bills electronically, till the day my computer crashed and for one month I didn’t know all the amounts I owed or when they were due. Now I always have the statements mailed to me.
Also, double check on your bill payer. When online bill payment first started, the bank I was with neglected to send in my car insurance premium, and the company canceled my insurance without notification. I first found out nearly a year later when I was stopped at a routine police checkpoint, my wallet insurance card was expired and I inquired why I hadn’t received a new one.
This just in…if you are living paycheck to paycheck, Auto Payments ARE NOT for you? This seems pretty obvious to me. I use Auto pay all the time and it is very convenient. I recently moved and had no issues with any of my accounts, however I am very organized and on top of all my payments.
I don’t particularly like automatic payments due to hubby being self-employed and with erratic payments. But I use it for a couple of things that saves me money–I signed up for my Medicare C&D to be automatically withdrawn which saves me $2 a month each plus the stamps. I know when my disablity check will come and so I automatically draft that amount out of the check in my checkbook (also the mortgage payment) and don’t have to worry about them being there in time. I prefer paying other bills by hand so that I can keep track of them such as electric and propane–this year I am tracking the amount used and want to do a chart in excell to track usage on a year to year basis based. I realize that I can do that on line, but paying your bills yourself puts you in control. We are paying off a couple of credit card bills and paying extra each month. By paying manually I can determine each month how much extra to pay on the bill and seeing those babies drop is a great thrill.