28 May The Cons of Automated Payments
Last week, we published The Pros of Automated Payments, a post which listed the benefits of making electronic bill payments.
At Two Roads, we believe that every decision should be an informed decision, especially when it comes to finances. This is why we’ve also researched the drawbacks associated with automated payments and why you should be cautious before deciding if paying bills electronically is right for you. So, here they are:
Difficult to Remember
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.
High Credit Card Balance
Those who do pay their bills using the automated payment option often have higher credit card balances, so be sure to always pay your balance in full each month. Paying only the minimum payment will drop your credit score, inflate your monthly balance, and increase it with owed interest and other credit card fees.
Many banks charge a service fee for automated payments, so be sure to read your bank’s terms and conditions before you decide to pay your bills automatically. Also, scheduling electronic bill payments makes over drafting your account very easy, especially because they are so difficult to monitor as mentioned in the point above. While a paper check may take anywhere from a few days to a week to process, electronic payments usually clear your account in 24-48 hours. Keep a good eye on your balance and all scheduled deductions to avoid overdraft charges.
While identity theft is much more likely when paying bills the old fashioned way, be mindful of the security risks that can occur when transmitting any kind of personal information online. Although electronic payments eliminate a paper trail, there is still the possibility that your information may be illegally intercepted. The best way to reduce your odds of being a victim to this kind of crime is to invest in anti-virus software and make sure your Internet connection is secure before you transmit any sensitive information.
Although uncommon, mistakes happen and electronic errors can occur. Be sure to review your accounts regularly to make certain your bill payments are being made correctly.
It is more difficult to stop payments on a bill that is paid automatically than one that is paid by hand. For example, in the happenstance your credit card is lost, stolen, expired, or cancelled. Because automated payments are not made in response to statement reminders, you would have to track down every bill payment you previously scheduled and transfer each one to a new card. This hiccup in what was once a simple process could easily result in late fees and bills left unpaid.
If you’re still considering paying your bills electronically after reading these cons, why not explore the benefits? Read our previous post, The Pros of Automated Payments, and find out how you can save time, money, and a lot of headache through this payment method.
For more information on how Two Roads can assist you with preparing taxes, writing a budget, setting financial goals, or provide general bookkeeping strategy, please contact us at 865-212-0063.