Is Automatic Bill Pay Right for You?

iStock_000013077091XSmallOne of the things I love about living in our modern world is the technology. I love how a number of chores can be performed easily with the help of technology. This includes financial chores like paying bills.

Automatic bill pay can be a great help to many consumers who want to make sure that their payments are made on time and in full. It reduces paperwork for everyone involved as well. If you travel, having automatic bill pay can relieve your mind while you are on the road. And, even if you stay close to home, it’s nice to know that your finances are moving smoothly.

But there are some considerations associated with automatic bill pay.

What About Mistakes?

There are stories of billing errors with automatic payments. It’s possible that you are double-billed for some charges, or that the wrong amount is taken from your account. Another concern is that the transaction might not have gone through as expected. If a transaction doesn’t go through, it can result in a late charge.

It’s important to pay attention to your account when you have automatic bill pay. It doesn’t take too long to log on and quickly glance through the transactions to make sure that your automatic payments have come out as they should. Double-check, and address problems immediately.

Pay Attention to Cash Flow

Anytime you automate a portion of your finances, you need to be aware of your cash flow. How does your money move through your personal economy? You need to make sure that you will have enough money in your account to cover the amount of the bills automatically coming out. They will come out on specific dates, so you should pay attention to your pay periods, and coordinate accordingly if you are using your checking account.

Strategy: Use Your Credit Card

I try to avoid having too much coming out of my checking account in terms of automatic debits. While it can’t be helped with the mortgage payment, and while I have the car and student loan payments deducted from my checking account, there are some smaller, recurring expenses that can be charged to a credit card and then discharged once a month.

My weekly produce box delivery and the monthly satellite TV bill are two examples of bills that I have paid automatically with my credit card. Using a credit card can give you time to review the charges and make sure that everything is accurate. Plus, it’s easier to carry out a dispute when you use a credit card than when the money is taken from your checking account. And, if you are using a rewards card, you can gain an advantage by racking up the cash back in many cases.

However, you don’t want to carry a balance. The key to using your credit card as part of your automatic bill pay strategy is to avoid paying interest. Make sure that your spending is within your income, and pay off the credit card each month.

Should You Use Automatic Bill Pay?

Remember that personal finance is, in fact, personal. This means that automatic bill pay isn’t for everyone. In some situations, it can do more harm than good. If you have a hard time living within your means, automatic bill pay can result in overdrafts — and the accompanying fees. When you are cutting rather close to the bone each month, you are likely to overdraw your account when the bills come out on specific days.

Automatic bill pay works well if you have a cushion in your account (this is another of the reasons I like to use credit cards for many of my recurring costs; it provides a way for me to cushion my checking account). It also works well for those who are interested sticking to a specific spending plan.

Those with irregular income can benefit from automatic bill pay when carefully applied. My income is somewhat irregular, since sometimes clients pay late, or I might have more money or less, depending on the month. Using automatic bill pay with my credit cards can be helpful, since it shields my checking account to some degree. By the time I need to pay my credit card, most of the payments are in, and I can pay off the card.

Do you use automatic bill pay? How do you make it work?

Posted in Money Tips permalink

About Miranda (Staff Writer)

Miranda is a freelance writer and professional blogger specializing in business, personal finance, and investing. She is a contributor for several personal finance web sites, and her work has been mentioned in, and linked to from, several online and offline publications. Miranda also has her own personal finance blog: Planting Money Seeds.

Comments

Is Automatic Bill Pay Right for You? — 12 Comments

  1. I have an auto payment set up for rent (which makes sense as it’s a frequent – weekly – payment, and always the same amount).

    All my other bills I pay online, but I do it manually.

    I did once have a power bill set up to direct debit, and yeah, had some billing issues…

  2. I’ve never had a problem with mistakes and overpayments–but occasionally, I haven’t noticed when a payment wasn’t made for that month. OOOPS!

    For the most part, it’s really been great to not have to worry about hardly any of my bills being paid on time. I look over the amounts, of course, but the overhead of bill-paying is now gone.

  3. My wife and I don’t use automatic bill pay mostly so that we can keep a close watch on expenses. Sometimes companies start charging more fees and doing little things that we might miss if we did auto pay. So we look at all the numbers each month and pay with a check, the old fashioned way, by hand. Helps us know where everything goes.

  4. I love my auto pay. I also try to use my credit card more to consolidate my purchases into one payment. Occasionally I will see a small debit purchase in our account which is my wife. Sometimes I know when there is limited funds I will have to remind her not to use the debit card until at least pay day. So far so good.

  5. I have a few bills that I pay automatically. The mortgage and my zero interest credit card. There are other bills I allow to charge to my credit card. It works for me.

  6. Auto pay is a great way to save time and it reduces the hassle of forgetting to pay recurrent bills, but like anything automated there will always be room for errors, so even though you have everything automated, be sure to check things out on a regular basis.

  7. The automated billing is something we don’t do except for the mortgage, insurance and some investments. Those are bills that are the same month after month. It’s the variable bills I like to review before I pay. I enjoy paying my bills on my own at the time that I want to pay them. I’ve had some problems in the past with an automated payment and it took so long to sort out. I thought, heck with it I’ll do it all on me own. I think this service is great for people that may miss a payment,want the ease of having it done for them on time and to save time. It does take time away from me but I’m used to the few minutes it takes now.

  8. I’ve done it for some bills. For others, I like to review the statements to make sure that I’m in agreement with what I’m supposed to pay. It’s good to have the option!

  9. I have had billing errors with automatic pay, but my credit company always takes the blame with no hit to my credit score. I think other companies may have different policies, so definitely something to watch out for.

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