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Many of us aim to straighten out our finances and become more comfortable with our money, and automatic bill payment is one of the best ways to immediately alleviate pressure on your wallet. Automatic payments mean that your bill collectors will deduct a payment amount from your bank account automatically on a set day each month, without you having to think about it or do a thing more than sign up. By not having to remember to send in checks to all of your billers, you will remain on time for every bill and never incur a late fee again. Of course, this system could create problems if it is set up improperly, so today we explore six ways to idiot proof your automatic payments:
Get All of Your Bills on Auto Pay
First and foremost, it doesn’t make sense to pay only some of your bills with auto pay. Mixing your bill pay methods by paying some over the phone, some by check and some automatically will dramatically complicate your finances and increase the likelihood that you will make mistakes and incur penalties. Furthermore, there is no reason why any credible biller should refuse automatic bill pay in 2011 — it is a well understood and extremely common way to pay, so if the billing representative tries to refuse, you should take it as a sign to consider switching services.
Start out by gathering a statement for every one of your monthly bills, no matter how small. This should include items such as rent, cable TV, utilities, car insurance, credit cards, etc. Now, call the customer service line for each bill and ask how to be set up with automatic payments. You should also request that you be switched to paperless billing (i.e. you get your statements online), this way you will not continue to receive paper statements even though you are paying automatically.
Schedule the Payments for the Same Day
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The whole point of automatic payments is to make your financial life easier, and that begins with consolidating your monthly payment dates. As you accumulate paper bills, you are forced to remember several scattered dates throughout the month when you need to pay them all. This creates problems, as forgetting one of the dates or spending too much money before a bill comes due can lead to late fees and negative marks on your credit score.
As you call each biller to set up automatic billing, request that they all take their payment on the same date each month. Remembering one day is a lot easier than trying to juggle five or more in your head, and as the payment day approaches each month you will be mentally prepared to make sure the money is available.
Keep the Payments Close to Your Pay Day
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A common mistake in setting up automatic billing is picking a monthly day that is far away from your pay day. Often times people will forget what date it is that they need to have bill money in their account, and will spend too much of their pay before the bills come due.Similarly, you shouldn’t select pay day as your automatic billing day either, because any lateness in payment or mistakes on the part of your bank may find you drowning in overdraft fees. The best time frame to trigger automatic bills is about three to five days after your pay arrives. This is enough time to account for delays in payment, but is close enough where you won’t end up spending the majority of your money before paying.
Get Direct Deposit
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Having your job set you up with direct deposit is absolutely essential to your success with automatic bill pay. The reason for this is that once you set up auto bill pay it is going to operate like a machine, deducting the payment amount on your set day without asking or giving you a chance to cancel or reschedule. If you still receive your pay by check and anything gets in the way of you depositing it, or it clearing on time, you’re going to be in a lot of trouble when the bill collectors come.
Introducing the possibility of human error to a system that is supposed to operate automatically opens the door for unintentional problems to occur. So long as your job offers it, (and most do), request to be paid by direct deposit and enjoy the peace of mind that comes with never having to make a mad dash to the bank on pay day before the bills come due.
Maintain a Separate Account for Bills
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For the ultimate protection, you might choose to set up a separate account for bills only and have your automatic payments deducted from there rather than your checking account. With this approach, it is best to always keep twice your total monthly bill amount in the account at all times. This is for emergency protection — if unexpected time off means you don’t get paid your full monthly amount, or if a financial emergency strikes, you’ve got enough in the bill account to float you until the following month. Therefore, if your monthly bills total $1500, you should aim to always keep $3000 in your bill pay account.
Set up Phone/Email Reminders
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If you are concerned with remembering when your payments are going to be due, and how much money you ought to have to adequately prepare, set up a safety net of reminders. The free online service, Remember The Milk, can be programmed to remind you of anything you’d like. These alerts can be sent to your mobile phone, email or both, and the mobile application is available for both iPhone and Android smart phones.
The idea here is that you can set these alerts to automatically remind you a day or so before the bills come due that you need to check your account balance and make sure you are prepared. If special circumstances have put you in a pinch, or caused you to forget when the bills are coming, you will be alerted within enough time to move money around from other accounts and make room for the automatic payments to clear.
Blake Gordon is a freelance writer for Echo Sign. Gordon specializes in writing about technologies that help automate businesses or personal lives such as electronic signature technology.
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