Setting up automatic bill pay plans can be a great way to manage your household budget. Many people find it hard to manage their money and numerous monthly bills, especially those of us who are busy with work, family and life in general. Here are some advantages and disadvantages of automatic bill payment plans.
PROS: Not sure if automating your bill payments is for you? Here are a few Advantages to consider.
Set it and forget it! It can be easy to accidentally forget to pay one or two bills when juggling family life, work life, etc. Setting up automatic bill pay plan can help make sure bills are paid every month. Instead of physically and manually paying those bills, once set up, it is a convenient way to manage paying your bills.
Save Your Credit Score
Setting up automatic bill pay plans can help you to not miss a payment or become delinquent on your loans. Payment history in your credit report affects 35 percent of the credit score. Automating your bills payments can help you establish consistent and on time payment history, which will have a positive effect on your credit score.
Some companies offer discounts on interest rates charged or the amount owed when automatic bill pay plan is set up. Setting up automatic bill payments can help you save money on potential fees, like late payment fees.
CONS: The “Set and Forget It” method of automatic bill payments can be a great way to manage your budget and bills, but here are a few Disadvantages.
Sometimes automatic bill payments are easy to forget about, especially if it is a subscription. Some people realize later that they paid hundreds of dollars per year on services or subscriptions that they no longer use. Make sure to review account statements to make sure you are not paying for a service or subscription you do not use anymore, or the amount coming out is correct, and there are no mistakes.
If there is not enough money in your checking account to cover your automatic payments, you may be charged excessive overdraft fees. Overdraft fees, also known as Convenience fees or Courtesy Pay, can become a financial burden. Consider setting up automatic bill payments for fixed expenses, like rent or loan payments, so that you know exactly how much money needs to be in your account. Variable expenses with charges that vary every month, like credit cards or utility bills, may make it difficult to manage.
Stopping Automatic Bill Pay Plans
Setting up an automatic payment plan is easy to set up. However, stopping it may be more challenging. Stopping automatic bill payment plans may require you to notify your financial institution in writing, by phone or in person. You may also need to monitor your account to make sure the automatic bill payments stop.
Setting up automatic bill pay plans is not for everyone, but it can be a great tool to keep you on track with your budget or spending plan.
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