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Not All Bills Should Go On Autopay

Before You Set Up Automatic Bill Payments

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Personal finance software and online bill pay manages money.

Paying Bills Online

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Autopay services are a real time-saver, as long as you know you'll have money in the bank to cover the bills. I set up free automated bill payments through my checking account at Chase, and while I still look over my bills to see what I'm being charged for, I never make a late payment when life goes into whirlwind mode.

Everyone's personal finances are different, though, and it's wise to think over whether or not you should auto pay each bill you have. Erin Peterson at Yahoo! Finance says that putting some bills on auto pay isn't the greatest idea, and can set you up for surprise fees. Peterson lists five bills that should still be handled with a stamp and snail mail, or an individual online payment each time you're billed. Here's her list, along with my thoughts:

  • Mobile phone bills: if you have kids sharing this bill, save yourself some grief and don't put it on auto pay. I share a phone bill with a teen and it's on auto pay, but I get notified via email a day in advance of the charges so I can stop payment if I need to.
  • Insurance payments: the argument for not auto paying insurance premiums is that doing so will prevent you from remembering to check for quotes from other insurance companies every year or two. True, paying that rising insurance bill can prompt you to get quotes from competitors, but you can find other ways to prompt yourself to do so, like putting a to do item on your calendar or task list with a future date.
  • Utility bills: paying these bills yourself vs. using auto pay will help you to keep an eye on rising household energy use costs that could be contained by an energy audit, furnace tune up or other measures. However, reviewing your utility bills every time they come in on paper or electronically accomplishes the same due diligence.
  • Gym memberships: the point against auto pay for gym memberships is that it's easy to overestimate how much time you spend working out at the gym each month. Assuming that autopay makes it easy to ignore the fact that you're paying big bucks without attaining the six-pack abs, carefully consider whether you'll really save money paying for a gym package.
  • Cable bills: the article didn't make a strong argument specifically against auto pay, but instead gave tips for reducing your cable bill, or getting rid of it altogether. Many people, including myself, have been double charged for on demand movies or, like Apryl Duncan at About.com Stay at Home Moms, have been erroneously billed for cable features they never ordered in the first place. Not having the cable bill on auto pay may force you to look at the bill and address questionable charges before paying it. However, I argue that auto pay doesn't cause errant charges on your cable bill - your cable company does. So, if you opt to auto pay cable, be sure to review your bill every month before the payment goes through.
My take on each of these points sound like I disagree with Peterson's ideas about autopayment of bills, but that's not necessarily the case. I think it's best to take each bill on a case-by-case basis and consider whether you will actually look the bill over every month if it's paid automatically. If not, then avoid autopay services to avoid getting ripped off. But, if you can maintain the discipline of checking those bills over, enjoy the convenience of autopay for every bill possible. As an alternative to paying all bills through one or more banks, set up an account with an online billpay provider to save time and eliminate late fees.

Tips:

  • When you set up autopay for a bill, choose an option to be notified of the bill via text or email before the payment goes through.
  • Most utility companies, including mobile carriers, let you set up an option on your account to get bills via email or text before automatic payments go through. Use this setting to keep an eye on account balances before they are paid.
  • Give all bills, whether you receive them electronically or on paper, a high priority. It's easy to overlook email and text notices, and paper bills that are stashed aside when you are busy.
  • It's obvious, but I have to say it: take a few moments to actually look your bills over to find discrepancies and charges like the recurring one your 15 year old signed up for that one time he was playing an awesome game on his smart phone.

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