Smart Guide to Automate Your Bill Payments without Losing Control

 automate_bill_payHow many bills do you have to pay every months?   At last count, each month I have electricity, gas, water, garbage, cable, internet, phone, cellphone, auto insurance, life insurance, multiple mortgage payments (primary residence and rentals), multiple home owner association dues, and multiple credit cards..  In all, 20 plus bills each month.  In our busy household with dual working parents with young children, time is precious.  I have automated all of these bills about ten years now.  I don’t spend more than 10 minutes a month on paying bills and have not had a late payment in years.
Beyond the time saving aspect, I also want avoid late payment.  Late payment is a bad bad thing in two fronts
  1. They will cost you dearly now, particularly for the credit cards.  Between the finance charge (usually 15%+ interest) and late fee (~$25), they add up quickly to hundreds of dollars.
  2. It’s bad for your credit score and could cost you dearly later.  Lower credit score would mean higher interest rate for loan, and depends the size of loan, it could cost you thousands of dollars in additional interest.
While auto payment has many benefits, I also don’t want to just open up my wallet to the vendors and lose control.  In my experience, with a few smart choices, you can have your cake and eat it too.  Let me share a few tips where you can benefit from auto payment while still retain control.  I use three different ways to automate all of these bills.

Bill pay through your bank with eBills

Online Bill PayElectronic bills (eBills) are online versions of your paper bills that you receive, view, and pay through your bank’s Bill Pay system.  This is my preferred choice because it gives me the most control and most visibility.  Many vendors offer ebill services nowadays and you can setup to pay these ebills automatically.  One key thing to remember is to always set a maximum amount you would pay automatically.  For example, for my garbage bill, it’s about $30 a month.  So I set my maximum auto payment to be $35, if the bill amount exceeds the maximum for some reason, the bank would generate an email alert and I would review the bill and take the appropriate actions.

This also have the added benefit to have access to multiple vendor bills from your bank account.  For example, we just registered my son for elementary school and they needed an utility bill to show proof of residence and it really easy to just downloaded directly from my bank account.

Bill pay through your bank with scheduled payments

This is also done through your bank’s bill pay system.  Some vendors who don’t offer eBill services, but have fairly predicable payment amount.  For example, my cable company don’t offer ebill service, but each month the bill is about $50.  I would set up a regular payment schedule through bill pay to pay the cable company $50 automatically each month.  Since the actual amount would deviate by a few dollars each month, the gap could get larger after a few months.  For example, if the actual amount is $55 each month, after six months, I would have a deficit $30 on the account and the vendor may come after you for late payment.  To get around this issue, after six months, I would adjust one of the scheduled payments to make sure the balance is back to 0.

Automatic withdrawal by the vendor

Automatic withdrawalAuto withdrawal is when you authorize the vendor to pull money out of your bank account directly.  This is setup directly from the vendor’s website.   This is by far my least favorite options as I have the least control over it, So I use this option sparingly when the previous two options are not available, and more importantly on with vendors who have a good reputation on customer service.

Credit card payment tend to fall into this bucket, they don’t offer ebills typically, and the payment amount varies from month to month.  In my case, I do automatic withdraw with Chase Sapphire and American Express, both with excellent reputation on customer service.

Out of sight but not out of mind

To avoid accidental overdraft, I set up minimum balance alert for my bank account.  When my checking account falls below the minimum threshold, I will get an alert to take the corrective actions.   It takes a little bit of time to implement this system, but once it’s done, it’s pretty much in auto pilot, I only take manual action when there is an alert.

While Automatic bill payment definitely saves me time and hassle, regular oversight is still important particularly for the third option.  For my credit cards, I still request to have paper bill every month so that I have a trigger to review the bills to make sure there are no suspicious charges.   That’s where I spend my 10 minutes a month.

Reader, do you have tips for bill paying?

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