Monday, February 18, 2013

How to Automate your Monthly Payments

Every month, significant cash flow leaves your bank account to cover your fixed expenses. Most households have at least a dozen different bills to that they are responsible for monthly, including car and home owner's insurance, car payments, mortgage payments, utility bills, cell phone bills, home technology (phone, internet, cable) bills, credit card payments, and more.

Bills may come out at different times throughout the month, and keeping track of them all can become complicated. If a payment is missed or late, there are consequences:
  • Interest charges and late fees
  • Poor credit rating
  • Cancelled services
In order to avoid these issues, there is the option of setting up bills with an automated payment option. There are different methods that this can be accomplished, for example:
  • Setting up payments through your online banking system - if you use online banking, you have the option to setup automatic bill payments to go to any payee. You simply need to have a copy of your bill to ensure payments are made to the right account. You can generally select the date the payment needs to come out, and make it a recurring activity for as many weeks or months as required. You do have access to remove or change an automated payment of this type at any time. Paying your car insurance online, or any other bill using this method protects you from missing any payments when they are due.
  • Setting up automatic payments with the vendor - some companies require that you setup automatic payments as part of the terms for providing you with a service. For example, your mortgage lender may require that you provide them with the details that allow them to withdrawal the payment amount from your checking account on a monthly basis. When you use this method, even if the amount of the bill changes, the full amount that is due will be withdrawn. There can occasionally be a charge for setting up payments through online banking, but having the vendor make the withdrawal does not typically come with additional fees.
  • Pay bills with USPS eBillPay - the US Postal Service provides a service that allows you to setup all bill payees online. The monthly payment amount does not need to be fixed each month, as provided the accounts are setup correctly, the system facilitates the process of issuing payment. The USPS system can also generate e-bills. While vendors can also supply  e-bills, this service ensures everything comes from one place. The only catch is there is a service charge. The first 6-months are free provided you need to make less than 20 monthly payments, but after that it is $6 per month for up to 20 payments.
Your financial standing is important, and using these automated payment options can ensure that your bills are paid in full and on time.

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