Signing up to pay bills with automatic payments can be a smart move if its handled properly. But there are also some pitfalls because, like many things in life, auto payments can be risky. Let’s explore why that’s true.
Among the advantages are:
- Convenience.Rather than stopping to pay bills every month, your bank can disburse payments according to your instructions. This enables you to review everything in one place. You can also receive notification when the bills are paid so you know it’s done.
- Bolstered Credit Score.Auto payments can help ensure your bills are always paid on time. This is one of the ranking factors that goes into calculating your credit score. Consistently paying on time improves your standing in the eyes of the credit reporting agencies.
- Security.Mailing payments each month places your checking account number and bank routing number in a mailbox each month where unscrupulous individuals can pilfer them. Meanwhile, automatic payments are encrypted as they travel over the internet, making your financial information difficult to capture.
- Benefits the Environment.Digital payments eliminate the need for paper, as well as the fuel your mail carrier consumes. This keeps more trees in the environment and reduces the pollutants emitted into the atmosphere.
On the other hand, you’ll also encounter:
- Less Control.If your money situation is tight and you need to vary payment amounts from month to month, automatic payments might make things more difficult, as you have to go in a reset the amount each time you want to vary from the pre-set payment. Further, if you have variable bills, automatic payments can make it tougher to keep track of how much you spent. This opens you to potential overdrafts, which can get quite expensive.
- Possible Late Fees.You must make sure the automatic payment gets credited before the due date of the bill. In a lot of cases, automatic payments aren’t processed right away. Some organizations can take as many as two days from the date the payment was made to verify it and credit it to your account. If this happens after the due date, your creditor might consider the payment late and impose fees, as well as report you to the credit agencies.
- Potential Mistakes.Computers are only as accurate as the people programming them. If someone at the electric company makes a mistake and their system bills you twice one month, you could wind up overdrawn because the bill was paid twice. What’s more, cancelled subscriptions can keep getting paid and cancelled services can sometimes renew themselves.
- Theft Risks.Most people don’t look at statements after they’ve placed a bill on monthly automatic payments. Confident the bill is paid, they think no more of it. This presents an opportunity for dishonest people to steal. If a scamming employee increases each customer’s bill by a few cents each month, they can rake in cash and people won’t question it because it’s only pennies more than they were expecting — so be sure to study your bill each month and ask questions if it unexpectedly increases.
The Bottom Line
The question of whether auto-paying bills is a good idea really depends upon your situation. If you’re having trouble making ends meet, working with a debt settlement firm might be a better move than auto paying bills.
If that’s the case for you, reviews may help you find a solid company with which to work. Either way, it’s a good idea to keep a close eye on things and reserve automatic payments for bills that are the exact same amount each month.
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