Pros and cons of automatic payments
Should you enroll in AutoPay? Here's some food for thought before deciding, and ways to help make automatic payments work with your budget strategy.
Automatic payments allow a merchant to make recurring drafts. If you're thinking of setting up AutoPay with State Farm® or other online accounts, here are some things to consider.
What are the pros of AutoPay?
- Convenience ― Setting up automatic payments can help make bill paying easier. Instead of manually paying the bill yourself, you are giving a company permission to automatically deduct the amount due from your bank account or credit card.
- Security ― If you still receive paper bills, they may contain personal and sensitive information. If someone stole a bill from your mailbox or trash, you could be at higher risk for identity fraud. Using AutoPay might help eliminate this potential risk if you decide to go paperless.
- No late fees ― Your bills automatically get paid on time, so AutoPay can help you avoid late fee charges that could potentially hurt your credit score.
- Saves money ― Many companies offer a small discount for going paperless. You can also save money on postage and checks if you currently pay by mail.
Some cons of automatic payments
- Easy to forget ― If you have all your bills on AutoPay, you might forget how much money is going out each month.
- Unexpected charges ― If you don't review your bills carefully, you may miss extra charges or increases.
- Overdraft fees ― Automatic payments will deduct from your checking account whether there's money there or not. This could mean a risk of overdraft fees from your bank.
- Fixed payments ― With AutoPay, you’re generally making the minimum payment or a set amount. To bring your balance down faster, you might need to adjust the AutoPay amount or make additional payments. This could make cleaning up your budget and paying down debt more difficult.
- Expired or lost credit/debit card ― When your card expires or is lost or stolen, you’ll need to remember to update your accounts with your new credit card information.
Tips for using AutoPay
A few simple steps can help you be smart about AutoPay.
- Set up reminders ― Email or text reminders can make you aware when bills are due, and help remind you to check your account balance.
- Consider using your credit card ― This can help avoid overdraft fees, but you might use this method if you're confident you can pay your card off each month. Look into whether there will be extra charges for using credit over debit.
- Review your bills each month ― Know how much money is coming out of your budget each month, and try to keep on top of any extra charges or increases.
If you'd like to set up AutoPay with your State Farm account, visit your My Accounts portal.
