automatic bill payment

Dos and Don’ts of Using Automatic bill payment

Using automatic bill payment can help customers to automatically pay the agreed amount on a decided date. You can authorize your service providers, banks, or vendors to do so. Automatic payment is the most commonly used pay bill of a recurring nature like memberships, mortgages, OTT subscriptions, etc.  Mobile phone bills, internet bills, and insurance payments are the categories that are majorly paid automatically in the US as per the PYMNTS survey.

how automatic bill payment work

How automatic bill payment system work?

Automatic bill payment works mainly in three ways:

  • Via bank
  • Via credit card company
  • By authorizing biller

Now we will explore each way in detail:

Via bank

In this method, you simply instruct your bank to make a payment to a particular biller. You can’t set your payment frequency and amount by logging into your net banking account. This method is usually the most secure one. During such types of transactions, there is an involvement of an automatic clearing house (ACH) to facilitate transactions.



Via credit card company

In this method, you authorize your credit company to pay bills automatically either periodically or on request from the biller. It involves providing the biller with your credit card information. Your bills get paid automatically by the credit card company and you just have to worry about clearing your credit card’s dues.


By authorizing biller

You can also directly authorize your service provider to automate your bill payments. You can even write post-dated cheques to facilitate auto payments.

Benefits of using automatic bill payment

Makes the bill payment process smoother

Using automatic payment can simplify your bill payment as you no longer need to remember expiration dates and due dates nor do you need to log into your Internet banking accounts again and again to make transactions. You can simply put everything in autopilot mode thus saving your precious time and effort.

Avoiding late payment penalties

Automatic bill payment can help to put your bill payments in auto-pilot mode enabling you to automatically renew your plans and pay important bills like mortgages, insurance premiums, etc. before the due date, which otherwise could lead to penalties.

Protect your credit score

You must be well aware of the importance of credit scores. A good credit score becomes even more important in a country like the U.S. which has a credit-based economy. It is very easy to forget the repayment dates of your mortgage, personal loans, etc. Such small mistakes seriously affect your credit score. Using automatic bill payment can easily solve this problem and save your precious credit score from degrading.

Cons of using automatic bill payment

Vendor errors can lead to penalties

Sometimes companies may raise faulty bills by mistake, then this faulty bill will get auto-paid which may even go unnoticed thus you end up paying a higher bill. If the faulty bill is higher than the funds in your account, you will also be charged overdraft fees and other bank charges which will non-refundable.


Overdraft in case of insufficient funds

If you do not have sufficient funds in your account and automatic payment gets triggered then you are liable to pay overdraft charges. And if there are multiple triggers for various bills then this cost may add up to a significant value.


Glitches in automatic bill payment can create serious issues

Automatic bill payment systems are not free from glitches. If for some reason like software issues, automatic payment does not get triggered, you end up paying late fees. It may become even more problematic if the service involved is of an essential nature like electricity or gas supplies. You may have to go through a lot of trouble because restoration of these services may take some time.


Unsuitability for nonperiodic bills

There are certain bills that are nonperiodic in nature and the fees and charges are also variable. In such conditions, you may end up paying before the due date or late if the bill comes early. Keeping track of nonperiodic bills becomes difficult with automatic payment.


Difficulty in case of disputes

In case you get an inaccurate bill from the vendor, the automatic bill payment method cannot analyze the bill on its own, instead, it pays automatically, and when you try to resolve the dispute, you have to approach both the biller for the credit of extra deducted amount and card company or facilitating bank to reverse the payment.



When you pay the bills manually, it creates a negative feedback system psychologically for your spending habits. You tend to spend less when you pay your bill manually or in cash. But when bill payment goes into autopilot mode, you tend to overspend and even do not bother to stop a subscription you might no longer need.

avoid automatic bill payment

Bill payments that you should avoid paying with automatic method

Variable bills like utilities

The bills that are nonperiodic in nature and those services whose usage fluctuates like electricity, water supply, and other utilities should be not paid by automatic bill payment because you may face difficulty in setting payment. It will also be problematic to analyze payment history because of the fluctuating amount of bills and their payment dates.


Spa and gym subscriptions

Such services are taken casually and skipped very often due to work or many other reasons. If you are not consistent in using these services it is better to keep their payment manual to avoid overpaying       


OTT subscriptions

OTT subscriptions like Netflix, Prime, and other such services related to entertainment should not be paid via automatic payment. Though it may sound a little uncomforting it is always a good practice. Because if you analyze the usage rate of these services then you may realize that there are many months when you have not used them for a single time. This situation is even more common if you have multiple subscriptions. So, it is better to keep such payments manual so that you can make more informed decisions.


Bills of higher values

Bills that are significantly higher compared to your monthly credit should not be paid via automatic bill payment because there is a higher chance of overdraft if you do not have sufficient funds in your account. And overdraft charges can be as high as $35 per transaction. So, avoid paying higher bills like rentals, EMIs of expensive gadgets, etc. through automatic payment.

3 Tips to Use Automatic Bill Payment Effectively

  • Make a record of the bills that you have put in auto mode and recheck them every month. Just keep a record number of such bills and their amount. (This will take only a few minutes to check from the bank statements)
  • Turn on notification for automatic bill payment in net banking or credit card to catch any discrepancy at the earliest.
  • Keep a separate check on important payments like mortgages to avoid any harm to your credit score. Learn more about mortgages.


Using automatic bill payment can surely make your payment experience smoother and tension-free but you should be a little cautious before authorizing automatic payment for your every expense. We advise you to dedicate at least one hour in week to analyzing the payments made through automatic payment.


What precautions to take before authorizing the biller for automatic bill payment?

Make sure to authenticate the legitimacy and credibility of the company you are authorizing for automatic payment. Also never share your bank details and debit card information with companies you are not sure about.

What happens if you don’t have sufficient funds in your account and automatic payment gets triggered?

You will be charged overdraft fees which may be as high as $35 per transaction.

How to stop automatic payment service?

You have to give a “stop payment order” to your bank at least three business days before the scheduled date. It can be done over the phone or via net banking service. Also, intimate the biller immediately that you have denied the automatic payment.

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