It makes automating your finances possible. It saves tons of time in our go-go-go world.
But – like most shortcuts in life – online bill pay has some serious downsides. And I’m not just talking about our “friends” in Nigeria who are fishing for bank account numbers.
Hackers aside, there are plenty of other pitfalls to online bill pay.
Knowing to look out for these things before you use online bill pay will help you stay on top of your finances and any automatic payments you set up to help achieve your goals.
1. Overdraft fees
You know that old saying “Quit it and forget it”? Well, when you “quit” paying your bills and have the online gods do it for you (so nice of them) you can sometimes forget about upcoming bills. And since many online bill pay services require payment via a checking or savings account, you could get hit with hefty overdraft fees if your account is too low. Avoid the overdraft debacle by always keeping a cushion in your checking or saving accounts that are linked to online bill pay.
2. Stopping automatic payments
When you tell a company that they can have “X” amount of your money every month with no questions asked, they love it. They don’t want that cash flow to end. Ever. They can’t quit you (er, your bank account). There could be some situations when the company you’re paying needs a certain number of days’ notice before you quit online bill pay. It’s usually not a big deal, but it could be if you’re tight on cash one month and need to cancel a service. It’s always important to read the fine print and see if it’s possible cancel at any time if necessary. And if you can’t cancel, no biggie Just take note so you can give yourself some lead time in the event you do need to cancel.
3. The “I’m feeling richer” effect
When you’re not writing a check or manually making a payment every month, sometimes it feels like your bills have disappeared. 6,000 channels of HDTV and I don’t have to make a payment? Sign me up! But, wait … You’re still paying that bill, even if doesn’t truly feel like a bill when you’re just clicking some buttons.
Ever heard of Dave Ramsey? This is the reason why he touts the all cash method. He believes that if you pay for everything in cash, it “hurts” more when you buy something. This will likely help you keep your spending in check. Repeat after me: Online bill pay is merely a service – not an elimination of the actual bill.
4. Changes to your credit or debit card information
If you’re paying your bill with a credit card (to get points for rewards, etc.), the information on your credit card will (most likely) change periodically. For example, most credit cards have an expiration date that changes every two to five years. If any number changes on your credit card, you will need to update this information through your online bill pay account. This information includes: credit card number, expiration date and the three-digit security code on the back.
5. Address and name changes
Similar to the example above, if you’re using a credit card for online bill pay and your name or billing address change, you will need to update this information. If you don’t move or change your name frequently, this shouldn’t be a problem for you. But for many of us in our 20s, getting married and moving are such a big part of life that name and address change are almost a constant occurrence. Don’t forget to update all your financial accounts, including online bill pay when either of these things change.
6. Statement review
How many of you are guilty of paying your bill without even reviewing the charges? (You can’t see me, but my hand is sadly raised as I write this.) Shame on us! How many horror stories do we have to hear about scandalous banks before we finally realize we must always, ALWAYS double check their numbers.
Online bill pay almost makes it too easy to skip reviewing our account statement for errors. Don’t let the banks pull one over on you – review your statements!
7. Hidden fees
Ahh, hidden fees. Businesses and banks seem to say, “Let me make your life easier and pay your bills for you while you just sit back and relax!” Sounds nice, right? Wrong. Fees are a big way for businesses and banks to make money. They will tack them onto to any service they can. Here’s a great example of how Verizon Wireless started charging a $2 fee to pay your bill online.
Luckily, there are many banks and businesses that don’t charge fees for online bill pay, but some may. It’s always best to look over the fine print and check with your bank before paying bills online.
If you look over this list, all of these so-called “pitfalls” are easily manageable. You can still use online bill pay to your advantage as long as you’re aware of these possible problems.
As always, it’s about staying on top of your finances. In this case, that involves reviewing your accounts and statements regularly and monitoring credit card/bank account information. And, of course, not letting your spending get out of control!
What other disadvantages would you add to the list?