Problems with Automatic Bill Payments

I used to make all my bill payments by check/cheque. I would wait for the bill to arrive through my letterbox and then send off the payment for the postman to deliver. Recently, though, I have automated nearly all of my bill payments by setting up direct debits. My main motivation for automating my bills was convenience, though there was the added benefit that companies sometimes offer preferential rates where customers pay be direct debits. (They do this because they are guaranteed a prompt payment).

If convenience is the main benefit of automation, then control is the flip side. I now have several direct debits all set up to automatically take money from my account on a set date in the month. The money will come off my account no matter what my account balance is, and if this happens to take my balance beyond my agreed overdraft, then I will incur an overdraft charge. I might also incur unpaid item charges.

The other potential downside to automating your payments is that you may start to accept the costs of your bills without checking to make sure that you’ve been charged correctly. And it may make you less likely to challenge yourself to reduce your ongoing costs. Your attitude might become ‘oh, my gas bill just comes out of my account’, whereas in the past you would have looked at the paper bill and the quoted amount may have prompted you to try to cut your consumption.

Having outlined these potential pitfalls to automation, I still feel that automating my bills was one of the best things I ever did. I don’t need to worry about forgetting to post the check/cheque, or rely on the postman to get the bill to the biller by the deadline. And I can still check how much I’m paying via my online banking service.

Another thing that is useful is that my bank has launched an electronic bill management service. This means that I can tell my bank which bills I am due to pay and they send me an e-mail when the bill is due for payment. This can act as a prompt for me to make sure there’s enough money in my account.

What I’d recommend, as with most things, is that you weigh up the pros and cons before making your choice. And remember, it’s usually possible to switch back again if you find that the automated approach isn’t working for you.