Many banks and service providers now offer automatic payments to make paying your bills a little easier. With this feature, the companies you do business with can automatically charge your credit card or debit your bank account on a predetermined date every month.
Automatic payments can eliminate many of the headaches associated with paying your bills, but they do require that you give up some financial control. Here are some advantages and disadvantages of automatic payments.
Pros of Automatic Payments:
- They’re more convenient. Paying all your bills automatically eliminates the need to visit multiple websites or send checks. You’re relieved of the stress, pressure, and effort of paying your bills.
- You’ll never forget a payment. Failure to pay a bill on time can lead to late fees and problems with your vendors. If you’re more than 30 days late, a late payment can significantly damage your credit score. Making automatic payments ensures you won’t miss a payment.
- Potential discounts. Some companies offer small discounts to customers who enroll in autopay programs. As long as they get paid on time, they may be willing to provide a small incentive.
In summary, automatic payments are less stressful and time-consuming than manually paying your bills. Furthermore, they protect you from the consequences of missing a payment and can save you a little bit of money.
Cons of Automatic Payments
- Ceding control of your cash flow. While you may be able to choose the automatic billing date, you will still have less control over when your bills are paid. Automatic bill payments can be a cash flow problem – if you have an unexpected financial emergency or if your bank account is short, automatic payments will still be taken.
- Less billing oversight. The automatic payment of bills can cause customers to become complacent with regards to their bills, causing them to spend less time reviewing charges and fees. You might overlook a mistake that caused you to overpay or a company that increased your rates.
- Risk of over drafting: Automated billing systems do not know how much money you have in your account to cover your bills. If your bank account is short, you may overdraft.
Basically, you have less control over your finances when you use automatic payments. By keeping hypervigilant, you can mitigate this effect, but this reduces the stress-relieving benefits that automatic payments are supposed to provide.
Should You Sign Up for Automatic Bill Payments?
Depending on your financial habits and circumstances, automatic bill payments may be right for you. You might be a good candidate for automatic payments if you always have enough money in your account to cover your expenses and you don’t mind monitoring your bills.
If you want total control over your finances, and your bank account balances are unpredictable, manually paying your bills may be the right choice for you.
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