The Pros and Cons of Automatic Bill Payment
Last week I wrote about the benefits of automating your savings, which I think we all agree is a good thing to do. There are other tasks you can automate to help with managing your money as well and one of them is your bill payments.
Do you hate sitting down to pay your bills every week or bi-weekly? It was never a fun time for me I can tell you that. Oh sure I did get some satisfaction from seeing the declining balances on my credit cards and loans. At times it would get pretty depressing though looking at those big balances that still needed to be paid off.
Wouldn’t it be great if you didn’t have to sit down to pay bills every week like that? Well it is possible, if you automate your bill payments. Doing this does have it’s upside, but it also has some downside so before you fire up your online checking account and start to set up those automated payments let’s look at the pros and cons of automatic bill pay.
Automatic Bill Payment Pros
- You won’t need to go through the pain of manually paying all those bills and watching your money disappear to Chase/AMEX/Capital One, the mortgage/rent companies, your car payment, utility companies, and all the other monthly obligations.
- You can be (relatively) certain that all your bills will get paid on time. No more sinking feeling in the pit of your stomach when you pick up a bill and realize it was due on the 5th, but today is the 6th.
- You can set up all your bills to be paid with a credit card (gasp!) that gives you cash back or other incentives. Then simply pay that one credit card bill IN FULL each month. You might be surprised how fast the cash back mounts up when you are paying everything with your card. Be warned though, this does require a bit of discipline to ensure you pay the credit card in full each month.
- Because you don’t have to manually log into numerous web sites for online bill payment or even write paper checks you save yourself both time and money. Sure you have to reconcile all the payments, but that can be done once a month and becomes a quick and efficient system once you have the automatic payments in place. If you write paper checks you even save some money since you won’t have to pay for stamps any longer.
Automatic Bill Payment Cons
- Many people fear errors and this keeps them from setting up automatic bill payments. Imagine what havoc it would cause if a company took $1000 from your account rather than the $100 they were entitled to. In truth, in 2010 there were less than 3 million unauthorized returned debits on a total volume of 15.61 billion transactions. This is just a bit over 0.03% of all transactions (Source: NACHA). Unauthorized debits happen for many reasons ranging from incorrect dollar amount to incorrect date of debiting, unrecognized transactions and occasionally fraud.
- Perhaps the most visible issue with automatic bill payments is the inability to discontinue the payments in some instances. I’m sure all of you have at least read stories of bill payments gone crazy, where the person is unable to stop a payment for months if not years. I myself ran into a similar problem once. This can be avoided in many cases by removing the authorization at the credit card company or bank who processes your electronic payments.
- Security issues are becoming more prominent in our society and these security issues keep some from setting up automated bill payments. No one wants to be the victim of identity theft, but automated systems are more secure than manual systems. Banks and the ACH have much more security than you will ever have at your home. If you receive paper statements you have to worry about them being stolen from your trash and if you are logging into multiple sites to pay your bills you have the risk of keyloggers that may have been installed on your system.
- You cannot become complacent after setting up automatic bill payments. Some are lulled into a feeling that everything is taken care of and fail to monitor their finances as closely as they once did. With automated payments you still need to monitor the payments to ensure they are correct and that you have sufficient funds to cover any upcoming payments.
Overall I think that if you are diligent in monitoring your automatic payments the pros certainly outweigh the cons. Time saved, money saved and even money earned if you are using a cash back credit card makes automatic bill payments attractive. As the volume of transactions increases the system is also becoming safer and more efficient.
Personally I do not use automatic bill payments, but that’s because I have control issues I know that if I automated the payments I would still be in control, but I like to get a weekly snapshot of my finances when I sit down to pay bills. If I automated everything I think I would be less likely to review my budget and finances as often. Do you agree with me that it is better to manually pay your bills as they come in or have you joined the 21st century and automated your bill payments as well as your savings?
Like you, I have control issues with my money. I don’t use automatic bill payment, because I know that I’ll have one of those situations where I have the money on the 3rd, but the bill is withdrawn on the 2nd.