The Pros and Cons of Automatic Bill Paying

What is Automatic Bill Payment?

As it sounds like, automatic bill pay is when you set up a money transfer with a company (or sometimes the company’s third party online bill pay service) and have them automatically deduct a scheduled payment to honor a recurring bill.

Many people utilize automatic bill payments to pay for their credit card, auto insurance, utility, monthly rent, phone, or other monthly bills.

You can choose to make automatic payments using your credit or debit card, or set up payments to directly come out of your checking or savings account. This is known as EFT (electronic funds transfer).

Automatic Bill Paying and Insurance

At A Plus Insurance, we often recommend that our clients utilize automatic bill pay since many of our carriers offer significant discounts to your insurance premium if you utilize this option. However, when setting up an auto insurance policy, we do offer various payment methods and options.

When it comes to auto insurance, the consequences of not having a policy in force can be detrimental. If you forget to make a payment and your policy cancels, you could end up unknowingly driving without insurance. Even if you aren’t caught (which could lead to fines or jail time), having your insurance lapse is very costly. Having your payments come out automatically can help prevent all that!

Is Automatic Bill Paying Safe?

We do understand that many people are concerned about online security and keeping their financial assets safe.

When using online banking or automatic bill payment, there is always a risk for fraudulent activity or other scary “what ifs”.

However keep in mind that utilizing “old school” payment methods such as mailing in your check, has it’s risks too. Mail can be stolen as well, and any financial information is equally at risk if not more, as it would have been if you did an online payment.

Thankfully, banking and other companies have worked very hard to improve online security. They utilize secure logins and various other security tools to make sure you are protected. Also, if you do suspect fraudulent activity, banks make it very convenient for you to to dispute the charges and get your money back.

Why You Should Consider automatic bill paying

Overall the benefits of using automatic bill paying are very appealing. Check out some of the pros:

• Easy and convenient: Most bills are not worth forgetting to pay. Companies give very little wiggle room and are not very lenient when you forget a payment. Shut off power, phone service cancellation, eviction notices, car insurance lapses, we’ve all seen the consequences of forgetting a payment. Autopay takes the stress of all of that off the table and means one less thing you have to remember to do.
• Eliminate late fees: Let’s say you remember your bill, but it’s still one day late. Late payments are expensive! Automatic bill paying ensure that you make your payments on time.
• Safer than you think: People don’t realize that paying via mail and check can be even riskier than paying with a card. Paper checks contain direct access into your funds, and if that’s stolen in the mail, your very sensitive information is up for grabs.
• Discounts: Many companies are encouraging their customers to go paperless and will often give a discount for doing automatic bill payments. Car insurance companies for example, give a significant discount if you pay using EFT/automatic funds transfer.

Things to consider Before Using automatic bill paying

As with all things in life, everything comes with a caveat. While automatic bill payments have significant perks, there are a few things to be mindful of.

• Cancellation of autopay isn’t automatic: Unfortunately, many companies will charge your bank account indefinitely if you do not actively cancel or cut off payments. If you cancel a subscription to a service, autopay is not always cancelled along with it.
  • How to prevent the issue: Make sure you do your due diligence to stop all payments if you are no longer using a service. Also, some companies demand that you give them notice to stop your automatic bill paying at least 5 business days in advance (or a number of days set by them), or else they will still deduct a payment.
• Non sufficient funds: If you don’t have sufficient funds in your account, your payment will bounce. Many companies will charge non sufficient funds fees as well, and that is in addition to a late fee. That could lead to almost an extra $50 dollars worth of unexpected fees.
  • How to prevent the issue: Keep track of your account by setting up an alert that goes off before the payment is scheduled to go through. If you don’t trust yourself to do that, use a credit card that has plenty of limit left and make sure to pay off the balance to prevent credit card debt.
• Easy to lose track of: If you have multiple companies that you do automatic bill paying with, it can be easy to lose track of your finances, and more money could be coming out each month than you realize.
  • How to prevent the issue: Make sure you are budgeting correctly and efficiently. Use a journal or app to make sure you are keeping account of every cent that goes out of your bank.

In Conclusion

How you pay your bills is ultimately a personal decision, and you should do what is right for YOU and your finances. However, the pros for choosing to use automatic billing is worth considering.