The concept of paying bills automatically goes back a lot of years. In the past there was only one way of doing it, that being to set up a payment plan with whomever you needed to pay bills to and allowing them to automatically draw money from your bank account.

lots and lots of bills
Sarah Gilbert via Compfight

For some things that’s still the only way you can go. For instance, life insurance payments have to come out of your checking account and some car loans do the same based on the organization. Luckily, these days it’s not the only option; you can also set up bill payments through your bank.

The question is which way is better and why, and do you want to do it in the first place.

My wife and I both have careers that sometimes leads to being away from home for periods of time. That can make it difficult to make sure all bills are paid, especially for her because she can be gone up to 3 months at a time, whereas I get to come home whenever I want to. This has led us to explore these options, and we handle them differently.

The way I handle most of my bills is to set up accounts online so I can pay them when I want to. Instead of giving them my bank account information, I use my bank debit cards, all of which are Visa, and set them up that way instead. I always know when my bills are due and you get at least a one day leeway so this works perfectly for me.

My wife isn’t so tech savvy, so she set everything up through her bank to pay the bills on a certain date every month and for specific amounts. This way she doesn’t have to look at any of the bills and, for the most part, everything’s taken care of without her having to run interference.

The only time this doesn’t work is when we’re paying something jointly. For instance, we split the mortgage, but the mortgage company won’t let each of us pay separately online. This means I pay my half in person while she pays her half via her bank.

That one works out okay but when it comes to our car insurance, they won’t accept payment from her bank if it’s not the full payment of what we owe. Therefore, she deposits money in one of our joint accounts and I write a check for her amount and another check for mine and pay in person.

As you can see, we’ve chosen a different route than setting up accounts to automatically with the companies we owe money to. It might be a convenient way to pay one’s bills, but it comes with complications.

One, you can only set it up to pay exactly what you owe. I like to pay a bit more than what I owe because sometimes it lessens how much I owe later on, in case I need that extra bit of cash in a crunch.

Two, there’s no way to account for times when your incoming pay might be late. That happens when you’re a contracted worker every once in a while, and if you haven’t built up your bank account amounts yet it can cause you double banking fees and an immediate increase in your interest rate; that’s never fun.

Three, it’s sometimes hard to stop those automatic payments from coming out even when you don’t owe them anymore. My wife bought a new car but for some reason the company she’d been paying the warranty to on her previous car continued taking the money out for 4 months, even though they knew she didn’t have the vehicle anymore. Even when they finally stopped doing that, it took another 2 months to get her money back.

Can you tell I’m leaning towards telling you about using your bank for automatic payments? As I said, I don’t use it but my wife swears by them, and here are the reasons why.

One, if you want to you can go in and change the amount your bank will take out of your account to pay your bills as often as you like without a penalty. Obviously the amount owed a creditor each month isn’t always the same, so having this kind of flexibility is nice.

Two, you can suspend payments every once in a while and, once again, no penalties. This has benefited her when we’re way ahead on a bill and I can tell her she can skip a payment for a month and use that money for something else.

Three, it’s easier for her to manage her account because when there are discrepancies she can contact the bank and easily take care of issues more quickly.

Four, these types of bank transfers are more secure than giving your bank account number to other parties. These days when so many companies seem to be getting hacked, this is probably the safest way to set up your automatic bill paying process.

If you’re someone who forgets to pay bills on time but you’re confident that you’ll always have enough money to pay them, using one of these methods makes sense to help protect your credit rating. At least now you have the information you need to make the best decision for yourself.

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