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.
Save, manage and borrow money with AAA. Learn More
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? ›
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.
Why shouldn't you use auto pay? ›
“Bills that fluctuate aren't good fits for autopay, such as your electric or water bill,” said Bethany Hickey, banking and lending expert at Finder. “If you have an especially high-use month, autopay can put you at risk for overdrafts if you're not prepared — and most overdraft charges are around $20 to $35 a pop.”
What are the disadvantages of automatic bill pay? ›
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 are the disadvantages of auto debit? ›
Because they are automatic, automated payments are difficult to monitor. You might find it hard to keep track of how many bills you have and which bill is paid when. This will make it much more challenging to budget appropriately and stay up to date with credit card and checking account balances.
What form of payment should you avoid? ›
Debit cards are a step above cash in terms of security, but are still a relatively risky payment method. 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.
Should you autopay bills with credit card? ›
Autopay is an easy way to make sure it gets done. If you're looking for a simple way to improve your credit score, paying your credit card bills on time can help get you there. Your payment history counts as 35% of your FICO score calculation, making it the biggest factor when it comes to achieving good credit.
Is autopay more expensive? ›
But what I found in my reporting is that people who use autopay tend to pay a smaller percentage of their bills overall, compared to when they would make manual payments. So in a situation with a credit card, if you're paying less of that balance, that means you're potentially paying more in interest.
Is autopay trusted? ›
Is the Lender Reputable? Autopay has an A+ rating from the Better Business Bureau and a 4.9-star rating from Trustpilot based on more than 375 reviews. The Consumer Financial Protection Bureau received 12 vehicle-loan- or lease-related complaints about Autopay in 2021.
Is it smart to have bills on autopay? ›
One big benefit to autopay is that typically, this option means you'll never have to pay a late fee. "You don't have to log in, and you're not at risk of paying late because you forgot, which can lead to late fees and ding your credit score. These are reasons why people like to set up auto payments," Rossman said.
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.”
Do banks charge for automatic payments? ›
Both the bank and the company might charge you a fee if there is not enough in your account. These fees can add up quickly. Pay close attention to your bank account balance and upcoming automatic payments to make sure there will be enough money in your account when the payment is scheduled.
What is autopay failure? ›
There are several reasons an automatic payment will fail. Mostly, they fail because of insufficient funds or the transaction was declined by the credit card company.
Is auto debit good or bad? ›
Auto debit can be a safe and convenient way to pay bills or make recurring payments, but it is critical to ensure that the payment details and frequency are correct and that any errors or unauthorised charges are regularly monitored.
Should you use a debit card for autopay? ›
You have a more real-time picture of your money
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.
Is it safe to set up autopay? ›
In general, using autopay is considered safe. Follow our guidelines: Explore your autopay options. Choices include whether you can use a credit card or just a bank account, and whether you still wish to receive an online invoice or paper bill in the mail.
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.
