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If you’re a customer of any utility or subscription service, you’ve probably been prompted to sign up for autopay. That’s typically a system where monthly payments are automatically deducted from your bank account. If you have an inclination to get on track with your budget, you might jump right on the autopay option. But before you set up those withdrawals, carefully think through the pros and cons of doing so.
The good thing about automatic payments is your creditors get their money right away. You don’t have to worry about late fees, interruptions in service or checking your account to see how much you owe. Autopay is convenient and allows you to set it up and forget it, which is particularly beneficial during those busy times of year when you have a million things going on in your life.
The bad thing about automatic payments is that you are no longer in control of where your money goes. Sure, it’s true you’ll always owe money to that creditor, but depending on how your month goes, you may want to pay a day earlier or later than the established date of the automatic withdrawal. If it’s a challenging time, you may want to take advantage of temporary payment arrangement programs offered by your utility company that allow you to divide payments into smaller chunks.
There’s also the potential for error. You may want automatic payments because you’re afraid you’ll forget to pay bills. It’s vital to audit automatic payments, however. If you cancel a subscription, the payment should also stop. On the flipside, you don’t want to run into a circumstance where a glitch causes payments to cease and important coverage like health insurance stops as a result. Autopay may also become a huge hassle when you want to change bank accounts.
Evaluate your reasons for wanting to set up autopay and compare it to your typical spending behavior. If there’s a possibility you won’t have enough money to consistently cover a bill, you may want to keep making payments manually. Coming up short might be a real risk if you have a bill that varies from month to month according to usage. A bounced payment can hurt your credit more than a long period of positive payment history, especially for things like utility bills. Focus on the big things, like mortgages, loans and credit cards, and reason how best you can keep these bills in good standing.
If you’ve already set up autopay, that’s great — just remember to always know where you’re money’s going, and where’s it’s already gone.