-
- 06/10/2024
Automatic Bill Payments: Pros and Cons
Automatic payments have some great advantages, just know all the details before you sign up!
Save time and Money!
Peggy Claytor
PROS:
It's convenient. Instead of visiting several different websites or fielding mailed invoices at various times during the month, you can automate the bill-paying process. If you do this through your bank, your bills can be organized and viewed in one place. And some companies will email to let you know they are about to take a payment. In a sense, instead of you going to them, they come to you.
It can improve your credit score. Your payment history is the single biggest component of your credit score, and FICO reports that negative marks on your credit history can fade over time when you are consistent with payments. With automatic bill pay, you can keep on time and avoid delinquency.
It's secure. Data breaches make headlines, but online banking is no less secure than leaving a check in an envelope in an unguarded mailbox. In fact, your accounts may be better protected through the encryption techniques that banks use online to secure customers' information.
Cons:
You risk overdraft fees ... Some payments fluctuate in amount, and if you’re not careful, your account may be overdrawn. Overdraft fees vary by institution, but the median is $34. Keep tabs on your bank account and have enough in there to cover all your automatic payments.
... and late fees. Even though it’s called "automatic,†a payment still takes time to process and reach a merchant or service provider. Confirm how long it takes for payments to arrive so you can set payment dates accordingly and avoid late charges.
They might make a costly mistake. What if your phone company accidentally withdraws your monthly payment twice? Or your cable provider adds a zero to your balance and takes out $850 instead of $85? Such mistakes, while rare, can happen, and redressing them takes time and effort.
