One 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?