Chances are you have a handful of expenses to pay on a regular basis, be it monthly or annually. These recurring expenses could include a:
- Utility bill
- Cell phone bill
- Student loan
- Car payment
- Credit card bill
- Monthly or annual subscription
By putting your bills on autopay, you are giving your billers and lenders the green light to automatically charge your account when the due date rolls around.
But while it makes sense to set up certain bills with automatic bill payments, others may not be as well suited for these programs.
It’s important to know which ones work well — and why — so you can manage your finances effectively.
Things to Consider Before Setting up Autopay
Autopay is a method of payment that allows you to add a checking account or credit card to your biller or creditor’s website. When the due date for a bill rolls around, the biller will charge your account, and the money will be removed from your bank account automatically.
This method of payment can be a wise decision for essential, recurring bills that do not change in cost. You can more easily factor them into your budget and feel confident knowing that they will get paid on time.
On the other hand, it’s better not to set up autopay for your bills that:
- Can increase or decrease depending on your usage: These include utility bills and variable phone plans. Such bills make it difficult to factor the expense into your budget.
- Can be adjusted by billers: Some billers adjust pricing occasionally or mistakenly add an extra cost to your account. If your bill is set on autopay, you will not have the opportunity to check for costly mistakes and dispute them with the biller.
- You signed up for at a promotional rate: Your biller will likely automatically adjust your rate to the standard price when the promotional rate expires, which will be reflected on your bill. If you don’t check your bill, you may not notice this change and miss the opportunity to negotiate the cost.
To help you further understand whether you should put your bills on autopay or not, here are the pros and cons of doing so:
Pros
- It’s convenient: By signing up for autopay, you free yourself up to focus on bigger picture financial goals, like adjusting your budget, investing, or working to save money.
- It helps you avoid late fees and credit damage: If you’re certain there will be sufficient funds in your checking account when it’s time to pay your bills, autopay helps you pay your monthly bills on time and avoid penalties.
- It can be cheaper: Some billers and lenders reward you for setting up automatic payments.
- It eliminates clutter: Autopay gets rid of the paper bills and statements that pile up from banks, service providers, and lenders — which is also better for the environment.
Cons
- It gives you less control: With automatic payments, a chunk of money comes out of your account each month and without your immediate approval.
- It can lead to overdraft fees: These fees are one of the top charges that Cushion detects on customers’ accounts. According to the doxoINSIGHTS report, it’s also one of the biggest hidden costs of bill pay, costing Americans $117 per year on average. If you set up autopay, you’re responsible for making sure there is enough money to pay the bills as they are charged to your account.
- It can make you overpay: Since your bill is automatically charged to your account with autopay, you don’t have the opportunity to review your bill or statement before you’re charged. Your biller may add charges or services by mistake; if you pay these charges automatically, you could miss the opportunity to flag mistakes or negotiate down the cost.
- It discourages you from reassessing your spending decisions: With automatic payments, bills and other charges can take you by surprise, especially when it’s on services that you no longer need or use. Gym memberships and streaming services are common culprits. There’s something to be said for manually paying these expenses — you’re forced to ask yourself, “Do I really use this service enough to justify the cost?”
At the end of the day, you should choose to use autopay if that is what works best for your personal finances and lifestyle.
Automated payments help if you are balancing a lot of other responsibilities, consistently keep money in your accounts, and don’t want the stress of remembering to pay bills every month.
However, if you have yet to finetune your budget, like to maintain strict control over when money is being withdrawn and from which accounts, or have sporadic spending habits, you probably shouldn’t use autopay.
6 Bills You Probably Don’t Want to Put on Autopay
Autopay is not as ideal for variable expenses. By paying these bills manually, you can check your bills for inaccuracies or overcharges, then dispute them with the biller. If you choose to not set up autopay, it’s important to stay on top of your bill dates and approximate payment amounts so that you do not accrue late fees.
Bills that you might not want to put on autopay include:
1. Utility bill
Unless you’re on a payment plan, utility bills typically change from month to month based on your water, electricity, and power usage. In addition to the fluctuating cost, you might want to pay your utility bills manually so that you can review the charges. With utilities, it can be difficult to overlook small issues. If you have a water or gas leak, your bill can help identify these dangerous and costly problems.
2. Phone bill
Many phone plans vary from month to month based on your calling, texting, and data usage. Setting up autopay for phone bills could keep you from identifying problems that are running up your costs. Additionally, phone bills may be charged on different days each month, depending on how many days there are. Without a set day to expect funds to be pulled out of your account, you could be taken off guard and accrue overdraft fees as a result.
3. Cable bill
From time to time, cable companies will adjust prices to align with new channels or offerings. If you do not study your bill each month, you could be paying for services that you don’t even use. Double checking your bill and paying manually also helps if you originally signed up for your cable provider at a promotional rate; if your promotional rate has expired, this could be a great opportunity to negotiate down your costs.
4. Gym membership
Your health is important, and gyms are a great way to ensure that you’re carving out time for both your mental and physical health. That is, of course, if you are actually taking advantage of your gym membership. It’s easy for the gym to fall by the wayside once life gets busy. If you use manual payments for your monthly membership, it gives you the opportunity to continually reconsider whether the gym makes sense for your budget and lifestyle.
5. Streaming services
This is another recurring expense that forces you to consider: “Is the cost really worth it?” If the answer is yes, great! If you’ve decided that it’s not necessary anymore, just as well. Now you’ve got a chunk of change to allocate to another area of your budget. This goes for music streaming services, television and movie streaming services, and more.
6. Subscriptions
Those FabFitFun, Beauty Box, and HelloFresh boxes — are they adding value to your life, or are they sitting in the corner of your room (or refrigerator) gathering dust? The same goes for annual subscriptions, like websites, newspapers, and magazines. In these cases, it’s often better to let the subscription service reach out with your bill so that you can decide whether or not the product or service is worth keeping around.
6 Bills You Might Want to Put on Autopay
Autopay is best suited for essential, non-variable bills, but isn’t necessarily the best option for every type of bill payer. Autopay eases a lot of the stress associated with remembering to pay bills. It helps you avoid lapses in important services — even if that means you acquire a fee in the process. Automatic bill pay can also be helpful when paying loans since a missed loan payment can lead to a bad mark on your credit report and credit score damage.
Some companies also offer perks, such as discounts and reduced interest rates, if you set up automatic payments. Remember: If you set up autopay, it’s important to maintain a budget and ensure you have enough money to pay your bills in your account by the due date. Autopay is an easy way to rack up overdraft fees by your bank if the biller tries to charge your account but you don’t have sufficient funds.
Some bills that are better suited for autopay include:
- Mortgage
- Car payment
- Student loans
- Unlimited phone plans
- Daycare
- Insurance (such as car, home, health, and life insurance)
Summary
Autopay can come in handy to cut down on the time, effort, and penalties associated with bill pay. However, the out-of-sight-out-of-mind mentality behind autopay is a dangerous one. Setting up automatic payments requires just as much planning as paying your bills manually. That’s, of course, if you’re paying attention to your automatic payments and using the service correctly.
The bills you shouldn’t put on autopay include:
- Utility bills
- Phone bills
- Cable bills
- Gym memberships
- Streaming services
- Subscriptions
The bills you should put on autopay include:
- Mortgage
- Car payment
- Student loans
- Unlimited phone plans
- Daycare
- Insurance (such as car, home, health, and life insurance)
