Life has become easier with the technology around us and banking is no exception. Gone are the days when you need to queue up in front of your bank to make payments or settle dues. Automated bill payments are the new normal now in the world of personal finance. Are you on it yet? If not, don’t worry, we’re here to tell you why and how automated bill payments work.
With the automatic payment system, you can schedule your online payment transfers and settle your monthly bills directly from your bank account. Amazing, isn’t it? Though with this benefit comes the costs. It depends on your bank or credit union how much such automatic payment will cost you so read all the details before you sign up for one. Let us have a look at how automatic bill payments can be a boon for you.
Benefits of automated bill payments
Helps in improving credit score
Maintaining a good credit score is very important since it impacts your finances and future borrowings. Setting up an automatic payment system can help you pay your credit bills on time, each month. This will help you improve your credit score over time.
It is easy
Automatic payments can be used on almost every recurring payment. It reduces the need to open and pay bills or websites every month and the need to manually enter details as well. Some banks and credit unions also notify you beforehand of such scheduled payments. Thus, it makes your financial inclusion easy, rapid, and hassle-free.
It is indeed safe
Banks and credit unions use encryption to protect your sensitive data and make it a secure space. Data breaches remain a concern when you act irresponsibly and leave details unattended.
Are there any cons to setting automatic payments?
Every coin has two sides, and before making a decision, it is indeed important that you analyze each aspect.
Late charges
Automatic payments are automatic but they take some time to proceed with the request and credit the amount to the concerned party. This can lead to late charges and thus it is required that you ask your institution about the overall turnaround time.
Fees associated with overdraft
A lot of time even recurring payments may vary in amount each month, in some cases, that can result in overdrawn amounts. This amount may attract some overdraft fees, and thus, you have to be careful. The average fee for overdraft payments is around $34. The best thing is that you have enough funds in your account and get information on such fees from your bank or credit union.
System errors
There can be instances where automatic payments are done twice or not at all; after all, this is just a system, right? That leads to consequences that you will have to pay for. Such errors are not frequent, but that doesn’t void their chances of occurrence.
How to be responsible with automatic payments?
Step 1: Only sign up when you are sure
You must and I can’t empathize with it more, but you must check whether your billing amount is the same each month or not. Based on that, sign up for an automatic transfer. Setting multiple payments with banks would help you simplify your life. If your payment amount changes every month, i.e. credit card payments, choose manual transfer to avoid any hazards.
Step 2: Always turn on electronic notifications or alerts
You get the option to turn on or off electronic notifications that you receive via text or emails when you sign up for automatic payments. Even though you are sure that the payments would be done on time, it is always better to keep track that they are actually done. Setting up electronic alerts will help you do so. You have to be mindful of your finances, whether it is you paying the bill or setting automatic payments.
