In the analog days before personal computers, the Internet, and smartphones, paying monthly bills was an event! Invoices came in the mail and were collected at a specific location and saved for that special day each month that they were paid. Invoices were reviewed to make sure all expected items had arrived and each check was written with a corresponding entry added to the check register (on paper). It was a manual exercise that required good organization, basic math skills, and concentration to ensure that the accounting was recorded correctly. Mailing the checks and tracing them in the register was not the end of the process – it was imperative to examine the monthly statement and balance the checkbook to make sure there were no math errors, the checks weren’t lost in the mail, actually they were collected by the creditor and properly credited to the account. Because there was always a lag between the due date of the invoices and the arrival of the bank statement, it was sometimes difficult to avoid unpleasant situations, such as the power or telephone company threatening to cut service due to a clerical error or a delay at the post office.
Since then, things have changed dramatically. First was the introduction of financial software that could help with monthly budgeting and paying bills. Computerization increased organization and reduced mathematical errors, making it easier to control monthly obligations. Today’s consumer has a wealth of tools at their disposal to pay bills, keep track of bills, and keep their personal finances organized. Instead of a shoebox full of paper and a checkbook, bills can be paid with an internet-connected computer or smartphone. Payments made using a checking account or credit card can be controlled in near real time. Even the role of the post office has diminished considerably due to changes in the bill payment process. Many people use automatic bill payment options that are available directly from providers such as the phone company or insurance company, as well as from many banks. Consumers may still have a checkbook in their possession, but most of the time it collects dust on a shelf or in a drawer, while bills are paid in other ways.
Automatic bill payments are the most convenient of all, with options to pay each vendor directly from a bank account or credit card. Automatic payment is great for its convenience and flexibility, but the onus still rests with each consumer to ensure the process works as expected and to maintain control of their finances. What are some things to keep in mind with automatic bill pay, and what are some tips for staying in control of your budget while still taking advantage of the automation available?
- Choose the payment method that suits you best: Many people find it more convenient to set up their automatic payment on a credit card rather than having the money instantly deducted from their checking accounts. That way, your monthly bills will appear together in one place and there will be less worry about cash flow during the month. And with credit card accounts accessible online, the balance can be monitored as needed. Many credit cards can offer consumer benefits such as frequent flyer miles, free merchandise, and other benefits. Using a credit card as a payment method is great for the organization, but be careful! Piling up charges on a credit card makes it easy to go over your budget and get into trouble at the end of the month. Use this method only if you are willing to pay off your credit card balance each month to avoid paying high finance charges on your fixed monthly expenses. If you are on a tight budget or have trouble limiting your credit card expenses, paying bills directly from your checking account is a better solution.
- Be prepared for changes: When using a credit card to pay most monthly bills, if your credit card is stolen or hacked, or when it expires and a new card is issued, keep in mind that automatic payments that you set up with that card are no longer applicable. will process. Keep a list of the accounts that use automatic payment, including the credit card that is used as the payment method for each account. This way, you can quickly update them when you receive a new credit card. If you are tempted to review your most recent statement instead of keeping a list, remember: some bills are monthly, some are quarterly, and some are annual, so not all will appear on your most recent statement. Maintaining a list is the most efficient way to easily update all applicable accounts.
- Stay involved in the process: Many banks help with the process and provide alerts when an expected bill comes in or doesn’t come when it’s scheduled – Bill paying is a great feature of online banking and can help you stay on top of your obligations. Take the time to review your bills each month to make sure there are no unexpected or erroneous charges; especially if you are on a tight budget and pay directly from your bank account. Unanticipated charges that are automatically deducted from your account can cause unexpected drops in your bank balance.
- Be smart when it comes to managing cash: If possible, don’t set up automatic payment on bills that can vary greatly from month to month, such as credit card bills. And always avoid paying off the balance of one credit card by adding it to the balance of another.
- Keep your credit rating current: Due dates for items like credit cards, health insurance, mortgages, and car payments are generally due on the same day each month, making it easy to ensure that auto-pay bills arrive on time. However, the due date of some invoices may vary. Make sure the payment date that you set for each invoice allows the creditor sufficient time to process the payment to avoid late fees. Similarly, if you use your bank’s bill payment service, for some providers there is a delay between the payment date and the receipt date; be sure to allow enough time to avoid late fees and bad credit.
The most important concept to remember is that while paying bills has become extremely convenient and paper cuts are much less common these days in the bill paying process, you are still ultimately responsible for your finances, your bills and your credit rating. Monitor closely, take advantage of the online tools available from your bank and your creditors to help you keep track of your finances, and remember to dust off that checkbook every now and then. Regardless of which method you choose to pay bills, it is strongly recommended that you keep an up-to-date record of all checks and debits, making a deduction for each item immediately (as soon as you have issued or authorized an item for payment), including any fees. associated. This will allow you to have an accurate and up-to-date checking account balance from which to work. This will also help prevent incidents of insufficient funds and their associated fees. Accurate and timely account records never go out of style!