Why I Don’t Use Automatic Payments

by Kay Lynn

Water Bill Payment Box
photo credit: bryankennedy

In an effort to simplify your finances (and life) some financial blogs suggest automating regular payments.  You can do this typically one of two ways.  The first is to authorize the payee to withdraw the money on a certain date.   The second method is to set up recurring payments via online bill pay.

Our use of AutoPay

Mr. Boomer and I have our car and my student loan payments automatically withdrawn from our checking account by the respective lenders.  Although we’ve never had a problem with this method I don’t like to give outside institutions authorization to debit money from my checking account.  I have a (irrational so far) fear that they’ll make a mistake or I won’t have the money and couldn’t stop the withdrawal.

So why did I in these two cases? They offered lower interest rate if I did it with the student loan a full percentage point lower for automatic withdrawals.  With the right incentive you now know I can change my financial behavior.

My Auto-Payment Mistake

Then following my logic you think I would be fine with setting up recurring payments using my financial institution’s online bill pay.  I do in theory but not in practice. Let me tell you why.

I like the convenience, postage savings and immediacy of using my bank’s online bill pay service.  A couple of years ago I decided to set up our mortgage as a recurring payment because the amount was the same month to month and then I wouldn’t have to worry about it.  The problem was the next month I forgot it was set up as recurring and entered it to be paid along with the other bills.

The bank’s website did not let me know the mortgage was setup as recurring so my first indication of my problem was when our account balance was significantly lower than expected.  I called the bank and there wasn’t anything they could do as they’d already paid the  bill.  The mortgage company wouldn’t refund a payment even if it was VERY early.

Fortunately, our mortgage is rather low (by Southern California standards) so we could handle  the double payment without bouncing any checks or going without food.  But I immediately canceled the recurring payment setting and have never used it since.  It’s great except for the human factor.

Content © Bucksomeboomer  2009. All Rights Reserved.

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{ 1 comment… read it below or add one }

Bret December 12, 2009 at 12:57 am

When I first started paying my mortgage, I used to let them auto-debit my account. But, I wanted to pay extra each month and they kept sneakily lowering the payment. So, I called them up (Home Savings, now WAMU/Chase) and told them I wanted it set to a fixed amount each month. They told me they couldn’t do that. So, I cancelled their auto-debit service and now I use Bill Pay.

It’s amazing what banks will tell you they can and can’t do.
.-= Bret´s last blog ..How to Deal with Fraud =-.

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