{"id":162535,"date":"2013-04-02T04:00:18","date_gmt":"2013-04-02T11:00:18","guid":{"rendered":"http:\/\/getrichslowly.org\/blog\/?p=162535"},"modified":"2023-09-24T09:45:10","modified_gmt":"2023-09-24T15:45:10","slug":"are-automatic-payments-worthwhile","status":"publish","type":"post","link":"https:\/\/www.getrichslowly.org\/are-automatic-payments-worthwhile\/","title":{"rendered":"Are automatic payments all they’re cracked up to be?"},"content":{"rendered":"
A few weeks ago, I paid a sky-high electric bill.<\/p>\n
After some investigation, I saw the problem: the electric company charged a $200 deposit fee for starting electric service at our new house.<\/p>\n
The deposit was supposed to be waived, since we had a good payment history with the electric company. Only here it was, on our bill. And since we’re on autopay, the electric company had already collected payment.<\/p>\n
After calling and sorting out the matter, the electric company said they’d give us a credit on our next bill.<\/p>\n
That wasn’t a solution I exactly loved, since it meant that our bills would be higher than usual that month. Maybe I should’ve fought them on that, but I didn’t. Also, we could cover the overcharge easily enough, so I figured, what’s the difference?<\/p>\n
But it did make me think about whether automatic payments are really such a great idea.<\/p>\n
Autopay is great because it’s convenient, requiring no action on our part to avoid late payment fees. There’s nothing to mail and no logins or passwords to remember. I never have to wonder, “Did I remember to pay the electric bill?”<\/p>\n
“Autopay is also an especially appealing feature for young adults just starting out in the real world because it makes it very easy to pay the bills<\/a>,” says Robert Long, managing editor for Kiplinger.com. “But it can be a trap.”<\/p>\n For instance, bills that have a variable rate, like your electric bill, can be especially tricky to track if you schedule automatic payments to cover them. “My bill might be $50 at one time of the year or as high as $200 other times of the year, depending on how much I’m using the heat or AC,” says Long.<\/p>\n And if a couple of bills are higher than anticipated, you could end up with a low bank balance, or even overdraft charges.<\/p>\n “Giving debtors access to your banking account can open you up to accidental overcharges, whether it’s a legitimate bill that’s just higher than you expected or it’s an accidental billing error where you’re being charged a little or a lot more that you should be,” says Long.<\/p>\n For instance, you might have a recurring annual contract, like a gym membership, that you didn’t want to renew but forgot to cancel. Or maybe you’re disputing a bill, but in the meantime the company is still charging you and taking the money out of your account.<\/p>\n “Autopay can be too automatic,” says Long. “It puts control into the hands of the debtor because they can go into your account. Maybe one time out of 100, there’s an accidental overcharge or you’re getting scammed, but either way it takes that control out of your hands.”<\/p>\n So why is a service that’s supposed to make life easier so problematic?<\/p>\n For one thing, many of us treat bills on autopay like a Ron Popeil rotisserie oven — we set them and forget them.<\/p>\n For instance, I like not worrying about my electric bill. But I admit that I’m not disciplined about checking the bill every month. And would I notice if the overcharge hadn’t been so large? Probably not. But with no real action required on my part to pay the bill, when life gets hectic, I don’t always review the charges like I should.<\/p>\n As with most things in life, you have to do what works for you<\/a>, and autopay is no different. As Kiplinger writers Amanda Lilly and Stacy Rapacon discussed in a recent article, there are pros and cons to automatic payments<\/a>, and sometimes what works for you changes as your situation changes.<\/p>\n So let’s talk about a couple of options.<\/p>\n Option #1: If you hate the idea of letting a creditor have access to your money, then skip autopay altogether. <\/strong>You can still enjoy many of the conveniences of autopay with online bill payment.<\/p>\n “Personally, I recommend going with online bill payment, but not autopay,” says Long. “Autopay puts control in hands of debtors, but with online bill pay, you’re in control.”<\/p>\n Option #2: If you’re concerned about avoiding late fees, use autopay, but use it wisely.<\/strong><\/p>\n Here are a few ways to use autopay carefully:<\/p>\nIt’s easy to set it and forget it<\/h3>\n
Two solutions to autopay problems<\/h3>\n
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