These days, many banks and service providers offer automatic payments to make paying your bills a little easier. This feature lets the companies you do business with automatically charge your credit card or debit your bank account on a predetermined date every month.
While automatic payments can remove many of the headaches associated with paying your bills, they do require you to give up some financial control. Here are the pros and cons of automatic payments.
Pros of Automatic Payments:
- They’re more convenient. By paying all your bills automatically, you no longer need to spend time visiting multiple websites or mailing checks. The stress, pressure, and effort involved with paying your bills is relieved.
- You’ll never forget a payment. Forgetting to pay a bill can lead to late fees and issues with your vendors. If you’re more than 30 days late, a late payment can do a lot of damage to your credit score. Automatic payments ensure you won’t be late on your bills.
- Potential discounts. Some companies offer small discounts for participating in their autopay programs. It ensures they get paid on time, so they may be willing to provide a small incentive.
In short, automatic payments are less stressful and time consuming than manually paying your bills. They can also save you a little bit of money and protect you from the consequences of missing a payment.
Cons of Automatic Payments
- Ceding control of your cash flow. While you may be able to choose the automatic billing date, you’ll still have less overall control over when your bills get paid. This can cause cash flow problems – if there’s an unexpected financial emergency or if your bank account is short, automatic bill payments will still come out of your account.
- Less billing oversight. Automatic bill payments can make customers complacent when it comes to their bills, causing them to spend less time reviewing charges and fees. You might miss a mistake that caused you to overpay, or overlook a company raising your rates.
- Risk of overdrafting: Automated billing systems don’t know if you have enough money in your account to cover your bills. If your bank account is short, you could overdraft.
In short, automatic payments give you less control and oversight of your finances. While you can mitigate this effect by staying hypervigilance, this reduces the stress-relieving benefits that automatic payments are supposed to provide.
Should You Sign Up for Automatic Bill Payments?
Whether automatic bill payments are right for you depends on your financial habits and circumstances. If you always have enough money in your account to cover your expenses and you don’t mind continuing to monitor your bills, automatic payments could be right for you.
If you want total control of your finances, and your bank account balances are unpredictable, continuing to manually pay your bills might be the right choice.