Everyone talks about how automating your finances can both save you time and money. We are encourage by the personal finance community and the creditors to automate our payments to save time, money and the environment. I personally have automated almost every payment and saving transaction that occurs in my household. I have cut my mail down by opting out of credit card offers and getting “e-statements.” Each time we automate a transfer or the paying of a bill we are removing ourselves that much further from the management of our money. While the benefits are relatively obvious people seldom consider the down side of automated financial transactions.
Utility Bills – Your utility bills are fluid, they fluctuate up and down from month to month, unless you are on one of those even pay programs. The fluidity itself doesn’t lend well to automated payments as your payment amount changes every month. That fluctuation usually isn’t that bad and you can tell whether it will move up or down based on the weather but if you budget tight you may not have wiggle room when the payment comes out. Your biggest fear should actually be the estimated usage. There are months when the utility company will actually guess what you used in power instead of coming out and reading your meter. I have seen bills be $100’s of dollars off from a bad estimate. That is going to be a big shock when it hits your account.
Billing Errors – If you have ever been a customer of the cable company that won’t be named then you know what a billing error is. Companies make mistakes, sometimes more than others. I once got a cable bill for $500 higher than it should have been, but that is a story for another day. If I had that bill on autopilot it would have been paid then when my mortgage went to get pulled my mortgage would have bounced and that would have been bad.
Security – When you are doing all of your financial wrangling online you have to be able to login to every account you have. Most people are going to use a single password on every site. This creates a single point of failure for your financial kingdom. Prior to the internet and automated payments your only concern was someone physically snatching your mail out of your mailbox. In a lot of instances it is easier to get at your desktop than your mailbox.
The E-Statement – The e-statement is actually what makes most of the other pitfalls possible. Most companies now are pushing for you to sign up for the e-statements as opposed to them mailing you paper statements. This saves the company on postage, paper, ink, and envelopes. What you get is a statement “reminder” in your inbox whenever the bill is do. This is the problem. You don’t get the full statement, it is super easy to just push it off and forget about it without ever looking at the detail. Those details are what keep you from paying ridiculous fees at your bank or overpaying for billing errors.
The Cascade Effect – When a billing error occurs that you don’t catch, it gets pulled out of your bank account. Depending on how much extra was pulled out it could cause a ripple effect. If you have other automated bills lined up they could start bouncing as a result of the first error. The bounces are going to cost you at the bank and be hell to sort it all out. It is important that you still keep up with your bills and know who to call if something goes wrong so you can head off the ripple effect.
I am not trying to talk anyone out of automating their finances, I personally only have two bills that aren’t paid automagically and they are both utility bills. The point is to keep in mind where things can go wrong and for the love of god look at those e-statements when they come in.