Pros and Cons of Automatic Bill Payments

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Staying on top of bills can be extremely stressful and daunting, especially if you’ve just entered the scary realities of adulthood. It’s all fun and games when you’re still in college, only having to worry about a handful of utility bills, rent, and possibly subscriptions: Netflix, gym, and magazines. However, once you enter the workforce and leave your college life behind, all kinds of crazy charges start showing up, including your student loan payments. Regardless of where your career and life lead you, you are likely to eventually purchase a car, home, or get new credit cards. You will be met with bills upon bills upon bills, and unless you’re a multitasking genius, staying on top of everything each month will prove to be quite challenging and draining.

This is the reason why many people opt for automatic bill payments, because, let’s face it, we trust computers and electronics way more than our flawed human selves. Our daily schedules are so busy and stressful, that we just can’t find the time or energy to monitor every single detail about our finances. Even if we could, there is still risk of missing something, and almost every missed payment means a penalty. So, because of this, automated payments are very convenient, and you can set up them up through your bank or the company whose services you’re using. Keep in mind that automatic bill payments are not perfect either. Here are some insights into what’s good and what’s bad about setting them up.

Pros of Automatic Bill Payments

Let’s first dig into why setting up auto-pay is a no-brainer for everyone dealing with stacks of bills.

It’s Convenient

I am almost 100% certain that this was the main reason why automatic payments became a thing in the first place. Who can keep track of a variety of bills on a monthly basis, without missing anything? Not me, I’ll tell you that. Automated bill-paying simplifies the whole process of paying bills - no need to go to all these different websites, worry about mail, stamps, or checks. Once you set up automatic bill payments, you let your bank do all the work, and you’ll save yourself unnecessary stress, time and regret that you’d feel if those late payment fees started piling up.

It Won’t Damage Your Credit Score

Your payment history is very important, as it makes up 35% of your credit score. If you keep missing your payments, or if making them in a timely manner puts a strain on you, then looking into auto-pay is a good idea, because payment consistency helps undo any delinquencies you might have had. You’ll be avoiding penalty fees and establishing a good payment history - it’s a win-win situation.

It Saves You Money

Apart from the obvious - saving money by not having to pay late payment fees - you can finally stop worrying about buying stamps and envelopes. Sure, these are small expenses, but they do add up over time, and nothing is cheaper than zero dollars. If you’re someone who doesn’t have a lot of self control, you might even be tempted to spend the money that’s designated for bills on something else. This also counts as saving money, no?

It’s Safer

This one is a little tricky, as we’re never entirely safe either in the physical and the virtual world. Especially recently we’ve been hearing a lot about data breaches, which make us believe that putting our information online is not the best idea. But your bank and the company you pay your bills to have your information already. The good thing is that their encryption techniques are more likely to protect you than your mailman or post office. So don’t shy away from automatic bill payments if you’re worried about safety, because honestly, you’re equally safe (or unsafe) both on and offline.

It’s Environmentally Friendly

I cannot begin to explain how frustrated I get when I get showered with unnecessary paper in the mail. We’ve all been in a situation when we got a bill in the mail that we’ve already paid. Automatic bill payments will eliminate this possibility and help you reduce your environmental footprint. Now you’re dodging unnecessary late fees, boosting your credit score, and helping our planet! It also helps free your mind and maintain a neat home when you don’t have to deal with the clutter of paper bills and checks.

You Might Get Rewarded

Many people opt for automatic bill payments because their credit card issuers offer points for paying bills with credit cards, or because their lenders have offered them interest rate discounts for setting up auto-pay. Some phone companies also offer bonuses for automated bill-pay. If you decide to use your credit card for automated payments, be extra careful - always make sure you can pay off the balance. In any case, read the fine print and see if there’s a reward system offered by your credit card issuer.

There Will Be No Forgetfulness or Unpredictability

It’s easy to forget about a bill, especially if there’s a ton of them. If you’re busy at work, on vacation, or just don’t have great memory, automatic payments do come in handy. The computer doesn’t deal with the complexity of life that we deal with, so it’s much easier for it to keep on top of things and pay your bills for you. You also never know when your check will be cashed in if you mail it, or if a bill will get lost. Auto-pay takes that unpredictability away.

Cons of Automatic Bill Payments

Sure, automated bill payments are very convenient, but are they always a good idea? Here are some drawbacks.

There Still Might Be (Some) Fees

Some banks and credit card companies charge a fee for paying bills online, so before you enroll, ask and then see whether it’s worth it. You also risk overdraft fees, because payment amounts might differ. It’s crucial to have enough money in your account to cover your bills (and potentially more, just in case), because you never know if the bill amount will increase. Also consider enrolling for auto-payments only for the bills with a set amount. Keep in mind that it is also possible to still be charged a late fee, because payments need time to be processed. Before you set those payment dates, ask to see how long it takes for them to reach the recipient. Many banks also set up due dates on their own, or change them, so keep track of those things if you don’t want to make your payment a late one.

You Might Get Overcharged

The best part about auto-pay can also be its biggest curse; you don’t necessarily authorize your payments, they simply happen because of our initial consent. You might miss what happens after. Your monthly payment could be mistakenly withdrawn twice, or a bigger amount might be charged. It doesn’t happen often, but there’s still a possibility. You could also end up paying for things you no longer use, like a subscription or membership. That’s why it’s important to keep an eye on your account; just because you scheduled auto-payments doesn’t mean that you shouldn’t check what happens to your money from time to time. Fortunately, there are apps designed to help you keep track of your subscriptions, as well as eliminate those which are no longer used. Some of these apps are Digit, Bobby, Truebill, Qapital, or SubscriptMe.

Stopping Payments Can Be a Hassle

If you want to cancel your online payment subscription, know when to do it. Some service providers require a month’s notice, while others might charge you an extra fee to cancel the service. It won’t always be easy to cancel auto payments once you allow a company or bank to withdraw money from your account each month. You might even have to mail a letter or go and cancel in person. Some service providers can also have poor customer service when dealing with cancellations online or via phone.

You Have a False Sense of Financial Security

When you constantly have to think about all your bills and take initiative to write checks or go to a company’s website to make a payment, you are aware that you’re spending money. Sure, it can become overwhelming to see all your money go toward bills, but if all of your payments are automated, you can easily be lulled into a false sense of financial security. You also might stop being careful with the charges made on your account, or even forget that you’re trying to get out of debt. If you opt for automatic bill payments, you need to make sure to still keep an eye on all your bills and have a good idea of where you stand financially. A budgeting app like YNAB or Mint might be helpful if struggle with this.

It Could Make Things Worse

If you struggle with money and live paycheck to paycheck, automated payments might leave you with little to no money, because in case of a slip-up, you might get overcharged. And then what happens? You are met with a series of penalty fees and before you know it you are in more trouble than you would have been just by making all those payments on your own.

Automatic bill payments, like everything else, have their advantages and disadvantages. It’s important to analyze your habits and traits before you decide to opt for them; they are a life-saver for some people, but very unfit for others. If you’re serious about your money and about keeping track of what happens to your account, then go for it! It’s also vital to know that you can financially handle all your bills being withdrawn automatically from your account. If you’re just looking for a way to stop thinking about all your bills, however, auto-payments are really not the way. Once you have bills to pay, it’s very difficult to run away from them. Ignoring them does you more harm than good. So before you go the auto-pay route, see how cancelation would work, see if you can choose the amount and withdrawal date, and what happens if mistakes occur. In the end, keep in mind that your bills are still your bills, and you need to deal with them responsibly.