Personal Finance Advice

Automate your payments? Automate your life. Put everything on autopilot and just sail on up that river. Sounds convenient and easy, doesn’t it? Yep. That’s what they want you to think.

I have to admit that automatic payments can make your life easier if, and this is a big if, you are organized and able to keep your bank account at a respectable balance.

Millions of people are living paycheck to paycheck. As soon as the paycheck goes into the bank, most of the money is drawn out to pay bills and living expenses. It’s hard to set aside enough money to get your bank balance built up. While automatic payments are due at the same time each month, it’s often a race to get that paycheck deposited in time to cover the auto payment. And overdraft fees are enormous, often going from $30 to $50.

Another problem with auto payments is that it can be difficult to get automatic payments stopped. I’ve heard of several people still getting charged after they cancelled a service. My son got charged for two months after he moved and cancelled with Comcast. It caused his bank account to be overdrawn and was a whole lot of headache trying to get reimbursed. Fitness clubs and credit card companies are also notorious for continuing to withdraw after a request to stop.

If you are paying off a delinquent credit card bill, you should never give them direct access to your bank account which is what you are doing with automatic payments. If your debt has been sold to a debt collector, never give them direct access to your bank account. They have few qualms about trying to deduct the entire amount from your account.

So what can you do if you want the convenience of automatic payments but not the headaches? You can click it! It works like this: you set up an account to pay your bills online, you provide all the information to pay the bill, just like when you are setting up an auto pay, but instead of them automatically taking the payment out of your account each month, you have to click a one-time payment button.

This is auto bill payment where you have the control over when you pay. I have all of my accounts set up this way and most companies offer it as well as automatic payments, they just don’t tell you about it. I get an email statement each month with a due date and when I get ready to pay it, I just click, and it’s done. In most cases, the payment comes out of my bank account almost instantly. It’s easy, convenient and the company doesn’t have access to my bank account. And like auto payment, most companies don’t charge for the service. As with auto payments, you are still going green and saving the cost of stamps and envelopes.

Of course, you still have to be organized and pay your bills on time. I like the fact that I am emailed a statement at least a week before the due dates of my bills. This is a good reminder and I often pay them as soon as I get the email.

You always have the option of using the good old US Postal Service. The cost of a stamp is still a good deal when you consider the cost of transportation nowadays and envelopes are really not that expensive. Many companies provide return envelopes anyway. But if you wait until the last minute to mail in that payment, you are risking a late charge. We all know that the postal service isn’t the most reliable source around. If you incur too many late charges with credit card payments, you risk having your interest rate increase. Also, late payments can make a big impact on your credit score, especially late mortgage payments.

Automatic payments are a tool, just like your computer is a tool. If you like the convenience and ease of automatic payments and don’t have a problem with keeping enough money in your bank account, then I must applaud you. If you are like me and your account runs close to dry between paydays, I urge you to try the one-time payment method of auto payments. It’s the tool I recommend.

So which do you prefer? Lick it or Click it?