Nowadays, many checking and savings accounts allow consumers to set up automatic bill pay, which allows you to set up payments for your bills with just one click of a button. Gone are the days when you have to remember when your bills are due since automatic bill pay automatically pays them.
“Consumers are increasingly looking for new ways to manage their bills, which points to the need for continued innovation by service providers across the payments industry,” said David Shapiro, senior vice president of payments at Western Union. “Less than one-third of payments occur via non-electronic channels, and consumers continue to use a mix of payment methods that provide enhanced choice, flexibility, control and convenience around their lifestyles and cash flow.”
While automatic bill pay seems opportune, it might not be for everyone. Find out the pros and cons to both options, and whether automating all your bill payments is right for you.
On the plus side, automatic bill pay offers you:
- Convenience - Along the same lines of the common phrase “set it and forget it,” automatic bill pay allows you to set up your bills to be paid on or before their due dates. This leaves you more time in your day to not worry about paying bills and focus on other things, such as work, your family, etc. All you have to do is find the time to set it up and then you can let your bank or credit card handle the rest.
- Less chance of missing a deadline - It’s a complete sigh of relief when you don’t have to worry about when bills are due — and automatic bill pay makes it less likely that you’ll forget to pay. You just set aside a time to set up your automatic payments, and then you’re free to double check your budget in your free time, without fear of late payments.
- Money savings - Bills being paid automatically means no more having to pay for checks, stamps or envelopes, and even saves you money in gas for trips to the post office. Plus, some credit cards will even offer you a small discount for paying automatically. So in the long run, this type of bill paying can actually be a bang for your buck.
Some disadvantages of automatic bill pay include:
- Losing track - “Auto-pay doesn’t excuse you from reviewing your bills every month,” said Randy Kratz, of the financial planning firm Willoughby Hill Wealth Management in Texas. “If you don’t keep track of your spending, you’re more likely to lose track and lose control.”
- Overdrafting your account - A common mistake of making your bills auto-pay is forgoing the need to ensure that you have enough money in your account to cover the payments each month — and that can result in incurred fees (not to mention a drop in your credit score). Automatic payments are not a reason to stop checking the money in your bank account, so be sure to keep yourself accountable to avoid late payments.
- Stopping payments can be difficult - While it’s very easily set up, automatic payments can actually be quite the hassle to discontinue. Also, it’s important to closely monitor these payments for weeks or even months after closing out an account or switching to a new one to ensure that they are definitely switched over.
While putting your payments on autopilot certainly has its advantages, there’s also something to be said for the disadvantages. Evaluate your personality against the pros and cons to see whether or not you should be automating all your bill payments.