Weighing the advantages and disadvantages

Should I Use Automatic Bill Payments?

by Gary Foreman


Is it wise to pay a recurring (monthly automatic withdrawal) with my credit card?
Brad

Good question! It probably depends on what you mean by wise. There are some distinct advantages to having bills paid automatically, but there are also some concerns you need to be aware of.

The shift away from paper bill paying has been significant in the last ten years. Most utilities and banks love it. For one thing, it reduces paperwork, data entry, and human errors. That makes it cheaper for them.

It's also more predictable. For recurring bills (like your utilities), you're much less likely to be late or miss a payment if it happens automatically. For subscription services, the renewal rate is higher.

Some companies are offering a discount if you pay automatically or charge you if you want a paper bill and pay by check.

That's why businesses like automatic payments. Let's take a look at what's in it for you. There are a number of things to like about automatic payments:

  • It saves time. Nobody likes to spend time writing checks and filing statements. Automatic bill paying eliminates that chore.
  • Automatic payments reduce paperwork and filing. With paper bills and checks, you need to keep a copy of the bill. If you're an organization freak, you might even have a two drawer file cabinet with bills filed neatly in folders. All that goes away with automatic payments. If you need to check your account, you simply go online.
  • It saves postage. The U.S. Postal Service won't like you, but every time you pay a bill automatically, you save the cost of a first class stamp. It's only a few cents, but they do add up over time.
  • You'll have less clutter. Your desk won't be covered with bills waiting to be paid. You'll be able to concentrate on the mail that really needs your attention.
  • Start your emergency fund today. Here are 11 easy ways to find $1000 for an emergency fund.

  • You can't forget to pay your bill. You might have been sick or on vacation, or maybe you just forgot. It's possible the bill got lost in the mail. It happens. But most people who write checks sooner or later manage to miss a payment. The computers that pay your bill automatically never sleep or get sick.
  • It avoids late payment penalties and fees. Because you're never late, you avoid late payment penalties and fees. You'll also avoid the hit to your credit score.
  • You'll enjoy predictable finances. With paper bills, you never know exactly when a check will clear your bank and be charged to your account. With automatic payment, you'll know. That might not be important if you carry a sizeable balance in your account, but could be critical if you run low.
  • It's more convenient. The bottom line is that automatic bill payments are more convenient. They do make life a little less complicated for you.

But, there are some drawbacks to automatic bill paying that you need to consider:

  • It can be hard to stop. Once you set up automatic payments, they happen, well, automatically. So you'll need to take action to stop them. That means time and effort on your part.
  • Some companies make it hard to stop. Knowing that you've given them authority to regularly charge your account makes some companies very unwilling to let you off the hook. Some make it hard to find or follow the instructions to stop automatic payments.
  • The payments are easy to forget. Unless you review your bank statement each month, it's easy to forget that money is going out of your account on a regular basis. Paper bills are a reminder that you're spending money.


  • You could spend money on things you don't use. You may have stopped using Netflix streaming months ago, but if you don't take action to stop the automatic payments, you'll continue to pay for it each month. With a paper bill, it's easier to write a note to cancel service and return it in the envelope provided.
  • You could spend more. It's generally accepted that people spend more with credit cards than if they use cash. Automatic bill payments can be a step beyond credit cards.
  • You could need to change the account. If you change credit cards or account numbers, you'll need to let them know. Otherwise, they'll try to charge an expired card and fail. You could face a late fee or other penalty.
  • You could still miss payments. Unless you have overdraft protection, you'll need to make sure you have money in the account to pay upcoming bills. Failure to do so could mean your bill doesn't get paid.

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So what should you do? You might decide that you'd like to begin using automatic payments. Begin slowly. Take a predictable bill, like the Netflix bill we mentioned, and start with that one. After a few months, when you get comfortable, add a few other bills that stay the same each month.

Finally, you can decide whether you want to include things that change like your electric bill (assuming you don't use a level payment plan).

You'll still need to check your monthly bills. What you've been charged each month could change suddenly, or you could find a charge that you didn't authorize. Therefore, you'll still need to check your account each month.

So is it wise to use automatic bill payments? Yes, it probably is, but you'll still need to pay attention to your finances even if you're not writing checks each month.

Reviewed October 2017


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Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com. Gary shares his philosophy of money here. You can follow Gary on Twitter. Gary is also available for audio, video or print interviews. For more info see his media page.

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