Managing your bills can be overwhelming. You’ve gotta keep track of each bill, when it’s due and how much must be paid. And if you have a lot of bills, that can be very stressful. But if you struggle to stay on top of your bills, automating bill pay is one possible solution.
One of the great benefits of online banking is auto bill paying. With auto bill payment, your bills are paid automatically on a preset date each month and your checking account, debit or credit card can be used as the payment source.
I get it, it’s definitely comforting to know your bills will be handled each month with a minimal amount of effort on your part. And while that seems great, there are some disadvantages to automating bill payment that you should be aware of too. Knowing the pros and cons of auto bill pay, can help you decide whether it’s the right tool for you and your money.
First up, the pros:
1. You’ll save money. Paying your bills on time means few late charges and when it comes to debt, if you’re paying more than the minimum amount due or making multiple payments in a month, it means you’ll pay less interest too!
2. Automating bill pay saves time. Though it’s not an excuse to put your bills out of your mind completely or set it and forget it, you’ll spend less time and energy worrying about paying your bills and whether they were paid on time. You won’t need to sit down and spend a lot of time on bill paying activities.
3. Your credit score might get a boost. Many people find that their credit scores improve after a few months of paying bills automatically and that’s because late payments are a primary cause of lowered credit scores. However, with auto bill pay, late payments should be a thing of the past. Just be sure that you keep your checking account funded adequately.
4. There’s a lower risk of identity theft. Identity theft continues to be a significant issue everywhere and in case you missed it, my social security number was recently found on the Dark Web. While there probably aren’t a lot of people who send payments through the mail, some people still do. However, sending snail mail with your account numbers and credit card numbers available to credit thieves is always a risk. While taking care of business online isn’t foolproof, there is far more effort made to keep your financial information safe.
5. It benefits the environment. Signing up for automatic bill payment often means you start to receive bills electronically or via paperless billing. Which means the company billing you doesn’t have to spend the money or chop down trees to mail you a bill. Which means there’s less impact on the environment. Not to mention the mail carrier will burn less gas delivering those bills to you or payments for you.
Now the cons:
1. A lack of awareness. There’s a reason this is my number 1 con for automating bill pay. Do you know how much your bills are each month? How would you know if there was an increase in your bills or a billing error? Can you be certain that you’ll have enough money in your account to cover the bill? When your bills are paid automatically, there is the potential to lose awareness and this can come at a steep cost to you in overdraft fees.
1. It can be challenging to stop payments. Automatic payments set up with your bank are usually easy to stop. However, automatic payments set up with a credit card or with the merchant can be very challenging to stop. Be sure to read the terms and conditions to make sure you understand the process for stopping payments. In some cases, written notification is required.
2. Excessive credit card debt. If you’re using a credit card as your auto payment source, it’s possible to rack up a lot of debt quickly, especially if you are not budgeting for those payments. Be sure to keep your eye on your balance and pay it in full each month to avoid going deeper into debt and accruing interest.
3. The costs can be higher. Most auto bill pay services are free or very inexpensive. However, some do charge a fee. Some merchants also charge fees if you want to pay your bills automatically. Be sure the costs, if any, are reasonable.
As you can see there are advantages and disadvantages with automating bill pay. If you’ve got a pretty good idea of what you owe, to who, and are in control of your money, the benefits definitely outweigh the risks. The time and money savings are a significant advantage over paying your bills manually.
Regardless of whether you choose to automate your bill payments are not, it’s important that you maintain awareness of your bills and the balance of your payment source. So be sure to review your bills and bank account balance(s) regularly.
Consider the pros and cons I mentioned above before deciding to add (or remove) this tool from your financial tool belt.
More on the blog:
7 Common Money Beliefs You Should Stop Believing