Automatic payments are a great way to ensure that your bills get paid on time. If you are serious about how to eliminate debt this is a good step to take. Also, if you are forgetful about your payment deadlines, this is the best approach you can take. However, like any other decision, there are positives and negatives to using automatic payments.
Good money practices. help you keep your finances in order. Automating your payments is one such step.
Using Automatic Payments – How Prepared Are You?
Financial stability is a key component of using automatic payments. Your reliable and consistent income and ensure you provision for your dues and settling credit card debt. Here are some positives and negatives to using automatic payments.
Pros for Using Automatic Payments:
- Convenience – Setting up auto-pay means you can handle bill payments on your own time. Scheduling multiple payments in one sitting is easier than keeping track of when you need to send in each separate payment based on due date or how much you have in your bank account.
- Paperless – Electronic payments, in general, are great for reducing the need for stamps, envelopes, or and an endless supply of checks.
- Discounts – Some creditors will offer reduced interest rates or other benefits for users enrolled in auto-pay. This is very common for student loan repayment services.
- Avoid Late Fees – If you miss payments from time to time, automatic payments can help ensure that money is received on time.
Cons against using Auto- Pay:
- Overdraft Risk – Automating payments means they get sent whether the money is there or not. Overdraft or money transfer fees will result if there isn’t enough in an account to cover a payment.
- Less Control – If payment schedules and amounts are set-up in advance, you don’t fully control when and how much creditors receive. This is especially risky for bills with variable amounts, like utilities.
- False Sense of Security – Automatic payments can lead to a “set it and forget it” mentality. Finances still need to be carefully tracked even when bill pay is automated.
- Tracking Payments – With convenience comes a different set of organizational challenges. When you’re not directly in charge of sending payments, it can be easy to lose track of who receives what and when.
- Payment Info Updates – When billing address, card numbers, or other details change, auto-pay programs must all be updated to ensure no payments are missed. This can lead to unnecessary late fees.
If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today.
