BILL PAYING DOS AND DON’TS
April 07, 2023 | 5 min read
Putting your finances on auto pilot can help you better manage your money and budget. This is especially true if you find yourself making late payments or forgetting to contribute to your savings account. Setting up auto-pay takes some of the guesswork out of managing your finances so you don’t have to worry about missing payments. So, if you’re curious about pre-planning your finances, here are some bills you should (and should never) put on auto-pay.
WHAT BILLS SHOULD YOU AUTOMATE?
You can set most of your payments on auto pilot by setting up auto-pay. However, auto-pay usually works best for fixed expenses that don’t change throughout the year. Therefore, some expenses worth automating include:
- Mortgage or rent
- Installment loans
- Short-term saving contributions
- 401(k) or employer-sponsored plan contributions
- Rainy day fund contributions
Keep in mind, even if you set up these payments for auto-pay, you can still make additional payments if necessary. For example, if you set up auto contributions for your savings account but get a bonus and want to contribute more, you could schedule an extra contribution.
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WHAT BILLS SHOULD YOU NEVER HAVE ON AUTO-PAY?
While auto-pay is a great way to save time and avoid late fees and penalties, it doesn’t necessarily work for every expense. With this in mind, here are some bills you may want to pay directly.
Utility Bills.Likely, your utility bills such as heat and water will fluctuate every month. So, it might be better to review your bill every month and pay it directly. This way, you can spot any errors and ensure all fees are correct.
Free Trials.How many times have you signed up for a free trial and then forgotten to cancel it? If you’re like other consumers, this situation has probably happened many times. Therefore, avoid setting up free trials for services on auto-pay, so you’re not charged for services you no longer use. Instead, set a calendar reminder a few days before the free trial ends. This way, you can make sure you’re actually using the service and it’s something you want to spend your money on.
Credit Cards.Setting up auto-pay for your credit card could be problematic. It’s important to always make your minimum monthly payment. However, if you use your credit card on a regular basis, your minimum payment can fluctuate, which may make it a budgeting challenge. Additionally, you don’t want to get into the habit of not reviewing your credit card statement every month. Reviewing your statement helps you pinpoint fraud or other unauthorized charges that may go unnoticed if you set your credit card up for auto-pay.
Additionally, not monitoring your credit card spending could wreak havoc on your finances if you’re not careful.
Cell Phone Bill. While some folks have a cell phone bill that never changes, others may have fluctuating charges. So, if your data usage varies from month to month, setting up auto-pay might not be the best solution. This is because cell phone companies don’t bill on the same date each month. Even if you are set to pay on the same day every month, the billing cycle could’ve shifted slightly. Therefore, the number of days on your bill and data usage can fluctuate. This causes your bill to increase or decrease.
If you aren’t checking your bill every month and you’re charged more than usual, unexpected additional funds could cause your account to overdraft, which in turn, could result in additional bank fees. Don’t get in a situation where a payment you aren’t expecting posts, leaving you with possible stress trying to find the extra funds.
FAQs
Don't: Set your utility bills on autopay. Heat and water bills can clue you into how much you're really using. For example, if you have a higher water bill, that might indicate that you have a leak somewhere that's costing you a lot of money. These bills are safer to pay manually month-to-month.
What bills should you never put on autopay? ›
That means the bills that have amounts that don't change drastically month to month. Things like your phone, your internet, even your rent, set those up, don't worry about them, but don't set your utility bills on auto pay, heat and water bills can clue you into how much you're really using.
What is the largest downside of setting up autopay to pay your bill? ›
Undetected Errors: With automatic bill payments, it's easy to get complacent about the money that's leaving your account. Your biller could accidentally withdraw the wrong amount or double-charge you. It could even fail to withdraw the money at all.
How to avoid autopay? ›
To revoke a live mandate:
- On your mobile device, open the Google Pay app .
- At the top right, tap your profile picture.
- Select Autopay.
- In the “Live” tab, tap the mandate you want to change.
- Select an option: “Pause autopay” You can specify a start and end date. ...
- Enter your UPI PIN.
- Check the status in the “Live” tab.
Automatic payments could help your credit score, but only if you time the payment to happen before the credit card's statement due date and around the same time you know there will be enough money into your bank account.
Why is AutoPay bad? ›
You Could Miss Fraud/Billing Errors
Another risk with autopay is that you get so used to these charges happening automatically that you don't think to scrutinize them. That could lead to issues like missed fraud or billing errors.
Does AutoPay make your bill cheaper? ›
Benefits of Setting Up Autopay
Pay less: When switching to autopay is incentivized, you get a discount on your bill amount or interest rate, which can add up. Avoid fees: Autopay ensures you'll never pay a late fee since your bill will automatically be paid on time, every time.
What is the safest way to autopay bills? ›
The first option, online bill pay, is set up through your bank. You give your account information for each creditor to your bank, and the bank automatically pays the bills each month from an account you designate. You don't need to give your bank account number to anyone because your bank initiates the transaction.
Does autopay pay the full amount? ›
What Are the Types of Autopay? Across credit card issuers, you will typically encounter three autopay options. These include setting the automatically paid amounts to your minimum payment, a custom amount or your full statement balance. Paying the full statement balance is the only option that avoids accruing interest.
Which is better auto pay or bill pay? ›
At the end of the day, you should choose to use autopay if that is what works best for your personal finances and lifestyle. Automated payments help if you are balancing a lot of other responsibilities, consistently keep money in your accounts, and don't want the stress of remembering to pay bills every month.
Autopay arrangements are convenient and can lower the risk of late fees, but companies also push autopay because it discourages customers from switching to another service—what the industry calls “stickiness.”
Can I opt out of AutoPay? ›
Call the company and tell them you are taking away your permission for the company to take automatic payments out of your bank account. The company's customer service should be able to help you, and there might be an online form you can use. Then, follow up by writing a letter or an e-mail.
Can a company force you to use AutoPay? ›
A: Under California law, a company generally cannot force a customer to enroll in auto pay without the customer's consent. If you did not agree to auto pay and repeatedly requested to be removed from it, the company should comply with your request.
What are the disadvantages of automatic payments? ›
Disadvantages of automatic bill payments include the difficulty in canceling them, the need to keep adequate funds in your checking account, and the potential of incurring a returned payment or late fee.
What is a good credit score? ›
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
Is it better to use a debit card or bank account for auto pay? ›
One of the best benefits of autopaying your bills with your debit card is that you have a more accurate, real-time picture of your financial standing. With credit, you can always tell yourself you have more money than you actually do — but that money comes due, with interest.
What form of payment should you avoid? ›
Debit cards could leave you liable for funds lost to fraud, provide criminals direct access to your bank accounts, expose you to overdraft fees and risk tying up your money in hold charges.
What is the safest way to auto pay bills? ›
Automatic Bill Pay Through Your Credit Card
Credit cards offer far better protection for you as a consumer, which is why you should always use a credit card (instead of a debit card or drafts from a savings account) for any payments that could potentially cause you problems — such as online automatic payments.
Is AutoPay making us worse at managing credit card bills? ›
Borrowers who use autopay pay off between 8% and 17% less of their monthly credit-card balances compared with customers who make manual payments, according to the study.
What happens if I pay my bill before AutoPay? ›
If you make a full monthly payment before your due date, AutoPay won't process for that billing cycle. If you make a smaller payment that isn't enough to pay the full amount due for the month, AutoPay will still process the full monthly amount due on your account.
