While I appreciate the Internet and all the convenience it has to offer; I am not ready to set my payments on autopilot. Automatic payments are offered by most companies you would owe money to (utilities, debtors, etc). When you set up an auto payment, you give the receiving company your bank account information and permission to withdrawal a predetermined amount of money at an agreed upon frequency (usually 100% of a monthly bill or payment). With auto payments you’ll rarely run the risk of being late or missing a payment. You can setup your payments and move on. However, I am not a fan of auto payment plans for the following reasons:
- You are giving sensitive banking information (routing numbers / checking account numbers / credit or debit card account numbers) to each entity. The more you spread this information around, the greater your risk for Identity theft. You should assume that any other site is not secure and poses a risk to your information.
- While the set it and forget it approach may appeal to some people, personally I prefer a slightly more active approach – especially paying off debts! There is something motivating about watching the debt balance diminish from month to month. It also forces me to be on the lookout for rates and policy changes.
- You are giving control of your finances to another institution. Should a financial need arise, you may need to postpone your payment for a couple days. Forgetting to make these adjustments could prove costly as you’ll run the risk of being hit with a late fee and/or bank overdraft fees. (Note: Hopefully an emergency fund is in place to deal with unforeseen circumstances!)
Instead, I prefer the convenience of online bill pay. In fact, it’s one of my requirements when choosing a financial institution. The features and benefits of online bill pay are:
- You load your various accounts in a centralized location as opposed to your financial information out.
- Maintain control! You dictate when and how much money is leaving your account. While rare, billing companies do make mistakes. If you have a dispute regarding a balance you won’t have the added frustration of having the money deducted from your account.
- Enforces active monitoring and discipline. While there is a risk of human error, these can be minimized by taking advantage basic bill pay features. It is easy to set up installment payments on a recurring basis. I currently do this with my student loans and car payment since the amount is the same each month.
- In an effort to go green, most companies offer paperless billing option that will allow you to view your bills online and / or have them emailed to you. Some companies are easily integrated into bill pay systems allowing you to see the amount owed and pay with 1 click. This eliminates the risk of typing in the wrong amount.
Auto payments and bill pay through banking are similar in that they are services that are designed to add speed and convenience to the bill paying process. However, the similarities end there.
Do you use auto payments, bill pay, a mixture or both, or neither?