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Use Autopay- but don't turn off your brain

January 26th, 2007 at 05:41 pm

In this day and age, almost everything is automated- car washes, cappuccino machines, even sidewalks now move for you. There's even Auto Bill Pay, where you can set up financial transactions that will occur on their own on a regular basis. In the words of that rotisserie commercial, "Set it, then forget it!"

That's all well and good, but I've always eyed Auto Bill Pay with much caution, mainly because I feel that, if I sit back and let the utilities and other companies automatically take deductions (which could vary month to month) from my checking account, I might become lax about double checking the actual bill. There's always the possibility of a mistake, and, should an error occur, it's much harder to fight the company for a credit (once they have my money, they're usually reluctant to return it). There have also been many situations where automatic payments have still gone through despite having cancelled the service.

On the other hand, you could use Autopay to help in your investments. The whole concept of "pay yourself first" is simplified when you set up an automatic deposit from your paycheck into your IRA or savings account. You can also choose to deposit a set amount each month into investment accounts such as Sharebuilder or Buyandhold, which then purchases fractions of ETFs or stock. The drawback here, though, as I learned the hard way, is that sometimes linked accounts/brokerages are slow to transfer money, meaning that sometimes although it says they withdrew money on XX/XX date, the balance doesn't show up until day(s) later. I ended up not having sufficient funds in my checking account because I thought my brokerage had already taken out the amount. Grrrr.

In summary, automatic bill pay can be helpful but I wouldn't put 100% trust into it. You still need to put in the effort to keep track of when your billing periods end, so your scheduled payments fall within the deadlines. It's just like driving on cruise control; you don't have to keep the foot on the gas pedal but you still need to stay alert for the bumps on the road =)

4 Responses to “Use Autopay- but don't turn off your brain”

  1. monkeymama Says:

    I don't use auto pay - don't trust any company farther than I can throw them. I feel better approving every charge. Just as easy for me to authorize online payments and do my own transfers immediately when I get paid. Then if something comes up I don't have a mess to clean up either. I don't like arguing with places who owe me money back - LOL. Most of all the control freak in me. Wink
    I am probably a little too conservative and extreme on that side. But overall good advice. Don't do it blindly - for sure.

  2. pjmama Says:

    I refuse to auto-pay or even have auto-deposit at work. Something about the intangibility of the situation. I need things in my hand to feel in control of them... heh.

  3. FMF Says:

    You won my latest Quicken giveaway, but I don't know how to contact you -- and you haven't contacted me. Please see this post for details:

    http://www.freemoneyfinance.com/2007/01/quicken_2007_gi_2.html

  4. baselle Says:

    Its why I like to automate my savings but not automate my spending!

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