Most of us are always on the lookout for ways to cut the amount of time we spend on mundane chores. One of the ways online banking has helped to free up our time is through the advent of automatic bill payment plans.
You can set up automatic payment plans for utility, entertainment, household bills, among others.
In fact, almost any vendor you purchase goods or services from now offers automatic payment plans, according to www.moneycrashers.com.
With an automatic payment plan, the monthly bill is recurrently charged to your credit card or debited from your bank account on a pre-set date every month without you having to do a thing.
It makes life easier knowing that bills are paid on time and in full each month. But while there are definite advantages to signing up for automatic payment plans, there are drawbacks as well. Thoroughly consider the pros and cons and how they could affect your lifestyle before signing up.
Advantages of automatic payment plans
Automatic payment plans have grown in popularity over the years as a result of many of the conveniences and advantages they offer.
Convenience: By setting all your bills to be paid automatically, you’re not as pressured to keep track of what needs to be paid when or paying them on time. Once an automatic payment plan is established, your bank or credit card will handle the rest.
Environmental issues: By eliminating paper bills and cheque writing, you reduce your impact on the environment. Not only do you save paper and trees, but you eliminate the carbon footprint left by snail mail. Plus, you don’t have to buy and keep on-hand a constant supply of stamps.
Less chance of identity theft: If your bills are not mailed to your home and you are not mailing in paper payments with credit card or bank account numbers, you reduce your risk of identity theft. There are risks when paying online as well, but the security surrounding these payments is typically far greater than the security offered by an unlocked mailbox.
Saves money: Since you will no longer have to pay for cheques, stamps, envelopes, or fuel for trips to the post office, having your bills paid automatically saves you money too!
Disadvantages of automatic payment plans
In spite of the many advantages, it doesn’t make sense for everyone to set up automatic payment plans. Here are some common reasons why:
Potential cost: Some companies will charge you a fee, and since automatic payments actually save them money, it is a very sneaky tactic. Don’t fall for this fee. If your biller wants to charge you, pay them the old-fashioned way and make them process a paper cheque instead.
Losing track: With automatic payment plans, it can be easy to forget what gets paid each month and when. This can lead to unnoticed bank errors or mistakes. Even though bills are on automatic plans, it is still ideal to have their due dates on calendar to remind you to check that they were indeed paid.
Overdraft fees: You still need to make sure you have enough money in your account to cover automatic payments. Otherwise, you will incur enormous fees via bank overdraft charges. Also, if you just pay your fixed expenses (e.g. Car payment) automatically rather than any variable ones (e.g. utility bills or cell phone bill), you will know ahead of time exactly what your monthly charges will be.
Stopping payments: Automatic payment plans can be set up in a matter of minutes. But stopping them can be much more difficult. Sometimes you have to notify your bank and your merchant, and you may even need to do it in writing. Still, they might not get the message the first time around, so be prepared to closely monitor payments if you are transitioning between pay accounts.
Running up a credit card balance: If you are not careful and don’t pay off your bills, you could be left with credit card debt you cannot afford. To avoid this, add up the bills you have automatically paid and send the full amount to your credit card each and every month.
Having all my bills automatically paid gives convenience, saves time and money. But you do need a certain amount of discipline to avoid trouble with automatic bill pay. For example, it is not a good idea to just “set it and forget it.” If mistakes occur, you could be held accountable. Also, good financial habits are rooted in an awareness of what you are paying and when.
Setting up automatic bill payment
Using automatic payments allows you to pay your bills on auto-pilot. You don’t have to sit down and write out cheques to your creditors each month, and you don’t even have to log into your various online accounts to pay your bills online, either. When set up correctly, automatic payments will simply pay your bills at the frequency you indicate, with no further action required on your part, according to www.wisebread.com.
There are two basic methods for setting up automatic payments: through your own bank or through each individual creditor’s website. Here is what you need to know.
Automatic payment options through a bank’s online bill payment
Most banks offer online bill payment. This allows account holders to send money from their current or savings accounts to whoever they want, at whatever frequency they want. Some banks physically print cheques and mail them to your creditors, while others will transfer money electronically.
You can set up your automatic payments by logging in to your bank’s bill pay website, setting up a new payee, and entering the account number of the creditor or utility you want to pay in the appropriate fields. Most banks allow you to set up recurring payment frequencies — which means you can schedule your credit card payments, for example, to send each month before they are due and not have to worry about sending the payment on time. Some banks will not allow you to create recurring payments, in which case you will still need to sit down at the computer every time you need to make a payment.
Automatic payment options through your creditors’ websites
The other option you have for setting up automatic payments is through each of your creditor’s and utility account’s websites. Most credit card companies and utilities have online account management systems that allow account holders to log in and schedule payments. Many also offer options for setting up recurring payments — for example, you can set up most credit card accounts to pull money from your bank account each week, biweekly, or monthly. This is common in Europe and North America. Nigeria is yet to have this.
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