26 Sep Automatic Payments Pros and Cons
One of the greatest luxuries of technology is automatic bill pay. It allows you the peace of mind in knowing that as long as you have the money in your bank account, your bills will automatically be paid on time relieving you of such a cumbersome chore.
Saves you money and helps your credit! Many companies offer their customers discounts, lower interest rates, or special promotion for setting up automatic drafts on their payments. Your creditors will be able to report your good payment habits and thus boosting your credit score. Many companies will send you reminders ahead of time that your payment is due and when the draft will occur, reducing the need for a calendar or constant glaring reminder.
Saves trees! By reducing the amount of checks your write or paper copies of your bills you have, you are helping to do your part in saving the planet.
Reduces your exposure. With automatic payments; your creditors are able to draft month after month without you having to login or call and provide your bank or credit card information. This reduces your risk of outside exposure to your personal information. If you typically take a more traditional approach and mail in your payments via check or money order, automatic payment drafts reduce your risk lost payments or mail fraud.
The perks to automatic drafts are wonderful and if you’re disciplined to keep yourself organized in the know. However, just like all other modern conveniences, there are some drawbacks as well.
Automatic can also make you lazy. As a society, we get lots of notifications; app notification, social medial notification, update notifications, email notification, etc. We get so many of notifications that we become numb to them and swipe them off the screen without a thought. This can be problematic and costly. For example, if you have a payment that fluctuates monthly and this month the payment is significantly higher than normal. If you risk over drawing your account. By staying disciplined in reviewing payment dates and amounts, you will be able to adjust and prepare yourself accordingly.
No money can mean paying more money. Should your account become overdrawn due to an error with your payment, you are subjecting yourself to late fees and overdraft fees from both your financial institution and your creditor’s.
Saving time doesn’t always save you time and money. Technology glitches occur all the time. So, what happens if your automatic payment is drafted multiple times or there is a mistake in billing, and you’re charged for 6 months instead of 1? These types of technological faux pas do occur, and they can have a waterfall impact on your other creditors. You can spend hours trying to unravel the mess and days getting your money refunded. Not to mention, you risk additional late fees or overdraft fees from other creditors. Stop payment plans are harder to establish in a timely fashion with automatic payments.
The risk of your personal information becoming compromised is greater. Data breaches are still an occurrence and any institution that houses sensitive customer data is susceptible to a data breach no matter how much they beef up their security. Your creditors having more minimal information does reduce your level of exposure but having automatic payments set up can also have the opposite effect and magnify your risk.
Automatic payments are a great way to stay on top of creditors and boosting your credit score. They are virtually painless and can even be done through your bank, saving you both time and money but when abused or neglected the opposite effect can occur. Finding that perfect balance of discipline and knowing your budget is key. Automatic payments for things that fluctuate heavily such as utilities bills are not recommended as much as those that remain consistent month after month such as insurance payments and gym memberships. Staying in the know on your finances is the best practice to keeping yourself and your credit score better protected.