Today, everything we do is about keeping things quick, easy, and convenient. Sometimes when we focus on just convenience, we lose other benefits that keep us in control of doing what is most beneficial for us. We cannot talk about personal finance without talking about debt and financial obligations. One of the first steps in building wealth is learning how to manage our current income vs our debts.
Being aware of where your money is going is essential. This can be done by simply creating a budget and sticking to it. A budget is going to give you an overview of what bills are due and when, in relationship to your income. Once you have done that, another great option for managing your finances is going to be setting your payments up on an automatic payment system.
Now when I first heard this suggestion of auto payments I absolutely cringed! I have very rarely accepted any discounts or incentives offered from my providers to set up auto payments because I was never interested in giving them authorization to pull from my account at a time that may not be convenient for me. To overcome this feeling of not having control over my finances and STILL being able to take advantage of having payments on automatic draft. I have looked into benefits of online bill pay.
Automatic Payments vs Online Bill Pay
What is the difference between automatic payments and online bill pay? They are both ways to set up scheduled electronic payments for your bills. They key difference is where the set up is initiated. An automatic payment is typically one set up directly with your provider. These are commonly offered through insurance, cell phone providers, rent/mortgage, etc. Sometimes they offer incentives to allow them to set up these automatic payments. What happens is that you give them permission to deduct a payment from your bank account at an agreed upon time. If the payment amount fluctuate or if the due date is slightly ahead of your next pay-day, you have already given them authorization to deduct that payment regardless.
The other option is online bill pay. This is my preference because I get to keep the control. Online bill pay is offered through several Banks and Credit Unions. The service is often times free, but it may have qualifications such as requiring a checking account or direct deposit set up. With this option, you give your financial institution authorization to send the payment out of your account (versus having your creditor pull from your account). You have more control and flexibility for the payment amount, payment dates, and it is easier to make adjustments.
Benefits of Online Bill Pay
- Maintain Control
- Automated Payments (One Time or Reoccurring)
- Convenience of Multiple Bills Organized in One Place
- On Time Payments (Help Boost Credit Score)
Cons of Online Bill Pay
- Fees (If Account is Poorly Managed)
- Decreases You Account Awareness (May Miss Errors or Fraud)
Online bill pay fulfills several key areas for me: convenience, money management tool, and organization. One important take away from the cons is that it can only be as effective as you make it. It is still important to keep up with your account balance close to due dates to avoid any fees or over drafting your account. Also, it is easy to set these payments up on auto pilot and forget about them, but it is so important to check in on your account to make sure the payments are always processing correctly. Getting into the habit of double checking the account assures you that you do not take any hits for payments processing late or incorrectly, and it puts you in position to identify any unauthorized charges or fraud that may be occurring on your account.