Many of us are constantly seeking ways to Reduce the time spent on everyday tasks. One significant advancement that online banking has brought is the option for automatic bill payments. You can easily set up automatic payment plans for various bills, including utilities, entertainment, and household expenses. In fact, nearly every vendor you engage with now offers this convenient feature.
With an automatic payment plan, your monthly bills are automatically charged to your credit card or deducted from your checking account on a predetermined date each month, requiring no action on your part. Personally, I have all my monthly expenses—from my AT&T cell phone bill to my car payment and Netflix subscription—charged directly to my Amtrak rewards credit card.
Knowing that my bills are paid promptly and in full each month simplifies my life. However, while there are clear benefits to enrolling in automatic payment plans, there are also some drawbacks to consider. It’s essential to weigh the pros and cons and how they might impact your lifestyle before making a decision.
Advantages
Automatic payment plans have gained popularity over the years due to the numerous conveniences they provide.
- Convenience: By automating your bill payments, you relieve yourself of the stress of tracking due dates and ensuring timely payments. Once set up, your bank or credit card takes care of everything.
- Rewards: One of my main reasons for using my travel rewards credit card for monthly bills is to accumulate points for travel. These bills can quickly add up to hundreds of points each month, allowing me to enjoy at least one free cross-country trip annually. Why not leverage your bills to earn free travel, rewards, or cash back?
- Environmental Benefits: By opting for electronic payments, you reduce paper waste and your overall environmental impact. This not only saves trees but also eliminates the carbon footprint associated with traditional mail. Plus, you won’t need to keep a stock of stamps on hand.
- Improved Credit Score: With automatic payments, you’re less likely to miss payments or fall behind, both of which can negatively affect your credit score. Consistently on-time payments can help maintain or even boost your credit rating.
- Reduced Risk of Identity Theft: By avoiding paper bills and checks, you lower your chances of identity theft. While online payments do carry some risks, they generally offer better security than an unsecured mailbox.
- Cost Savings: Automating your bill payments can also save you money, as you won’t need to purchase checks, stamps, or envelopes, nor will you have to spend on trips to the post office.
Disadvantages
Despite the many benefits, automatic payment plans may not be suitable for everyone. Here are some common concerns:
- Potential Fees: Some companies may charge fees for automatic payments, which can be a sneaky tactic since it saves them money. If a biller imposes a fee, consider paying them the traditional way with a paper check instead.
- Overdraft Fees: It’s crucial to ensure you have sufficient funds in your checking account to cover automatic payments. Failing to do so can lead to hefty overdraft fees, which defeats the purpose of convenience. This is why I prefer using my credit card for bill payments. By automating fixed expenses (like Netflix or car payments) rather than variable ones (like utilities), I can better predict my monthly charges.
- Difficulty Stopping Payments: While setting up automatic payments is quick, canceling them can be more complicated. You may need to inform both your bank and the merchant, sometimes in writing. There’s also the risk that your request may not be processed correctly the first time. For instance, I recently had my credit card number stolen, which required me to get a new card and update all my automatic payments—a time-consuming task. I’ll need to monitor these payments closely to ensure they’re charged to the correct account before their due dates.
For me, the convenience of automatic bill payments far outweighs the potential risks. It saves me both time and money while providing rewards. However, it does require a level of discipline to avoid complications. It’s not advisable to simply “set it and forget it.” If errors occur, you could be held responsible, and maintaining good financial habits involves being aware of what you’re paying and when.
