When is it Beneficial to Use Automatic Bill Pay?
Let’s face it, worrying about stacks of bills each month is a pain in the neck. Isn’t it easier to set up automatic withdrawals and payments? Yes and no. In some cases automatic payments could save you time and money, but surprisingly often, automatic bill pay is simply throwing off your budget and costing you an arm and a leg in fees. If you’re wondering where all your money is going each month, it’s time to take a closer look at your recurring expenses.
Is Automatic Bill Pay Hurting Me?
You’re a parent, professional, and/or property owner. You’ve got mortgage payments, credit card payments, phone bills, car loans, and possibly student loans. How else can you get everything paid on time besides automatic bill pay? I’m here to tell you that even though it can feel overwhelming, it’s essential that you take a hands on approach to your finances. It’s incredibly easy to get carried away with automatic payments. Before you know it, you forget about the dozens of automatic payments that are coming out of your account. Can you say for sure which of those are essential and which aren’t? Do you know exactly which cards or accounts the payments are coming from? It’s time to take a closer look.
Here’s the thing: many automatic bill pays (and online payment systems in general) charge a fee to process your payment. Sometimes there are exceptions to this rule, but often times you’ll receive a charge no matter what card you use. Other payment systems will only allow you to use a credit card or bank account without a fee — that’s a lot to keep track of when you have a mound of bills to pay each month.
Let’s actually take a look at the numbers. In another article, I discussed the possibility of using five different bill pays per month. If you’re using five bill pays per month, at an average charge of three dollars each, you’re losing $180 each year. However, most of us have more bills than that. Imagine using automatic bill pay ten times per month. That’s $360 per year. You get the picture, but that’s a big deal. Why would you want to deny yourself that amount of savings annually?
How is it Affecting My Budget?
The other negative side effect of automatic bill pay is the fact that potentially, it completely throws off your budget. It takes away your control over your finances. For example, most of us use some sort of TV streaming service, like Netflix or Hulu, that charge us monthly. Sure, it’s a small fee, but those can add up even faster than automatic bill pay fees. You’re probably looking at seven to ten dollars per subscription or more.
I remember there was a time in my life (not so long ago) where I was signed up for three TV subscriptions, a couple of premium podcasts, and a monthly makeup box just for fun. I only used one of those TV services regularly, barely listened to those podcasts, and used maybe one of the makeup subscription items monthly. It became abundantly clear that I was just throwing away money each month. I was spending about $70 monthly on items that I didn’t even use. That’s about $840 per year that I could have put into my savings account. That’s the cost of a small vacation.
Use my mistakes as an example, take a look at your finances very closely and decide which charges are essential and which ones are luxury. I’m not at all saying that you can’t have a few extras, just don’t throw money into things you’re not actively using.
When Should I Be Using Automatic Bill Pay?
Personally I would only suggest using automatic bill pay when it’s absolutely necessary. However, I know that most of us have extremely busy lives and it’s hard to manually make every single bill payment. So, here is my suggestion to you: only use automatic bill pay if you know there are no fees associated with the charge and you have actually worked that charge into your monthly budget. Charging something automatically and then forgetting about it altogether doesn’t help you when you’re trying to piece together your finances at the end of the month.
In addition, I would suggest only using automatic bill pay through institutions that you can trust, like your bank. I would also implore you to only use it for essential bills, like mortgage payments, credit card payments, and car payments. Again, I know that it’s easier to rely on automatic bill pay sometimes, so just use your best judgement.
Maintaining a healthy budget and savings account should be at the forefront of your mind, not the ease of automatic bill pay. I know it can be tempting, but think about that vacation, car, or home you’re saving up for, not the ease of charging and forgetting.
Financially stable individuals take control over their monthly budget and save according to a goal. It’s so easy to look past all the tiny conveniences and luxuries that we subscribe to each month. However, you have the power to take back control over your money. Choose to not use automatic bill pay whenever you can. In all honesty, it’s just not worth the price.
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Trisha is a writer and blogger from Boise, ID. She is a dedicated vegan, an avid gamer, cat lover, and amateur SFX artist.
This post was updated February 28, 2019. It was originally published June 27, 2017.