Automatic Withdrawls

DON'T DO IT! I have used it for many years and on many many many occasions they have taken out the payment more than once a month. I had one incident with my gym membership where the took out my payment three times in one day! I even had my car payment taken out twice and then other transaction went through and things started to bounce! I was over in my account due to their error and they REFUSED to pay back any money or pay my overdraft fees. They said they would just not charge me the next month. AND THEN THEY DID! I now do all my payment online and just have remineders set up in my blackberry.

Ramit Sethi strongly supports using auto withdrawal systems for both bills and savings.

Here's his interview on the cbs early show:
http://www.cbsnews.com/video/watch/?id=4946939n

Personally, I've used auto bill pay for years. I've never had a problem. I track my accounts in quicken. In fact, I auto-pay my min balance on my credit card and then manually pay off more (usually the whole thing) each month. When things get busy, this has saved me from late fees.

I am a huge Dave Ramsey fan and listen to his show almost every day. I think what he is saying is do not give creditors electronic access to your account. The only automatic withdrawl we use is our auto/life/personal articles insurance policies. If you listen to his show people will call in saying some creditor took ALL of their $ from their account, this guy just called because his bank holds his mortgage and there was some tiny fine print that said they could take the $ if they fell behind and the bank cleaned out their account! So yes, it is a good idea to NOT do this, set up bill pay online and have savings automatically withdrawn( we do that for our kids college funds), but not to anyone you owe money too. Does that make sense? Good luck!

I've been doing Auto pmts for years on as much as I can, which now is pretty much everything. I even set up my monthly childcare payment using my bank's bill pay system. I write about 2 checks a month - if that.
I have never had a problem, except once when my mortgage company took 2 payments out at once. I can't completely blame it on them though, since I made an online change, and apparently had set up a pmt through some other auto methodology year's prior (not online), so they took it to mean that I wanted to make 2 payments that month. I was able to call the lender though and get it straightened out, and even get one of the payments back. I had something similar happen with my credit card company too a couple years ago, but again it wasn't a blatent error on their part or anything, and there too I was able to get the dup pmt back promptly.

As for the comment someone made about it taking time to remove auto payments this can definitely be true with some companies (although many can do it that same day - like my mortgage and car lender). However, when it comes to things like my utilites, I have never, nor do I ever plan to NOT pay them for a month, or would I intentionally pay them late. I would typically just not pay off my credit card bill for the month (which I usually like to do every month), if I was short on cash. I guess if your situation is one that you are concerened you wouldn't have enough money in the bank to pay the bills, then I wouldn't suggest auto pays for these.

Dave recommends never letting creditors or collection agencies have direct access to your savings or checking accounts as many times they will tell you they are taking $100 but will empty the account. I have never heard him say you shouldn't use them to pay legitimate bills with legitimate companies (public service, mortgage, etc...) but have only heard his opinion on doing this with collection agencies. Hope that helps.

M.

I think as long as you make sure that you're not at risk of overdrafting, it makes perfect sense to pay bills that way. I find that when I do auto bill pay, I just have to make sure I pay attention to how much I'm actually paying each month! We actually chose to do auto pay on credit card to we get the points/miles whatever from the CC and then just make sure we pay it off each month.

Hi J. - I really like Dave Ramsey but I disagree with him on this one, in part. His main objection is that it is easy to lose sight of how much things cost when we do auto withdrawal. He also thinks that if we set the minimum payment on a credit card, for example, we are less likely to pay more than that on auto withdrawal. He is absolutely on track there.

However, I think an excellent credit rating is even more important, especially in these financial times. I do as much as I can on auto-withdrawal and I pay online whenever I can. I save on stamps, checks and time. I am also assured that I never miss a due date. With that said, I also make sure I review my statements every month because errors can happen like this month when my cable bill didnt get withdrawn like it should have.

By the way, a dear friend learned the hard way about how easily we can lower our credit score. It was a good lesson for me and that's why I thought I would share it with you. She and her husband have good incomes and a perfect payment history but their credit scores tanked suddenly. She said it was because she consolidated all of their credit card balances onto one of those 0% intro rates cards and maxed out the credit line. Since the bureaus dont update in real time, it looked like she had her old balances and the new maxed out big one. She also paid only the minimum due on the new card for a few months. To the agencies, it looked like they were credit seeking and not able to pay even though the 0% interest rate would help them and in reality nothing much had changed. It triggered all kinds of things like their bank slashing the limit on their personal line of credit and even their car insurance premiums to go up.

The lesson was to avoid paying minimum payments for longer than 3 months and to not allow your balances to exceed more than 50% of your credit limit.

Couple of things....
1- use your banks bill pay. Most of them are free and you have control. You can even set up routine bills to be paid automatically ie..mortgage, day care, preschool, insurances and it only takes a second to fix if the amount changes. You can even tell it how many months to be automatic.
2- Using your banks bill pay makes sure that others don't have control of your bank account. I too have had someone take extra out of my account(before online bill pay) and it took a lot of time I didn't have to fix it.
3- some banks even have a dispute department if something goes wrong with your bank bill pay and the check doesnt get there by the dead line and they will pay any fees that are incurred from it being past the date you set in the computer. (Please note that they do not pay for fees from you being late.)

I am in Treasury for my company and you never want to give out your bank information unless absolutely necessary. I don't use automatic withdrawals. I push my payments out electronically. Most banks offer online bill pay where you can set up monthly payments to go out automatically. Or you can do an automatic credit card payment. If you use automatic withdrawals, it's a lot harder to fight an incorrect billng because they already have the money.

We use automatic withdrawls for all of our bills. The one thing to remeber is to always review your bills for errors. Since you are not having to look at the bill and write a check it is easy to over look billing errors.

I've definitely heard him say this. He probably discusses it in one of his books. Go the library and review one of his books. Might be on a website too. Google something like "Dave Ramsey, automatic withdrawals, bills".

We use automatic withdrawals for most of our bills. The only contrary things I can think of are watching to make sure they are taking out what the bill says (and the bill is correct) and to watch it on credit cards. My credit card will automatically take out the minimum every month. Maybe that's what Ramsey's saying - you need to pay more than the minimum?

If I didn't use automatic withdrawal, my bills would be paid consistently late. I just have a hard time sitting down and paying bills.

I love them. The only thing is if they don't go through--just make sure that you check to make sure they are paid.

I do not use automatic withdrawals. I do not like the idea of anyone having direct access to my accounts. I also don't trust that all companies bill correctly all the time. But I do pay bills electronically - I just use a program that lets me review the bill and initiate the payment. It lets me know when each bill is due and when I need to send the payment. It takes a little more attention - I check it every few days to see what is coming due - but I feel much more secure. That being said, the chances something bad is going to happen with automatic withdrawal is small - but on the off chance you do start to have problems with a company, it can turn into a HUGE nightmare and can affect your credit report which is ridiculously difficult to get corrected. I just prefer to avoid that small chance.

J.,
You want to be careful with them as you have no control over them and you are giving out your account number or debit card number. Ex, if you auto pay with a phone company and then cancel your plan or change carriers you may still get charged for a few months. Yes you can get your money back but it takes a lot of work and frustration on your part. Ideally you should sign up for online bill pay...this way you can set the bills to pay automatically on any given date but then you also have the control to cancel them or stop them. Nobody has your information and if a company doesn't accept electronic payment the bank will issue a check thought the check has your name and address on it the account number on the bottom actually belongs to the bank so you still are not giving out your specific account number. People come into the bank a lot needing to issue stop pays on automatic payments and can't figure out why they can still get charged we as a bank can put a stop pay on a dollar amount and biller but if the dollar amount changes the charge will still go through. Be very careful with auto pays through the company you are billing.
Best of luck,
N.

We like Billpay. I've even been able to cancel things same day. We occasionally do use our debit card number when we get a discount for automatic withdrawal, but usually just Billpay. One time when the check didn't clear, I didn't even get a stop payment fee! You can't beat free service! Hope that helps!

Automatic Bill pay from your bank is not the same things as automatic withdrawals from the companies. Sometimes you have a company where it is the only way to pay online, but that is pretty rare anymore. I too shy away from automatic withdrawals. I have had companies sign me up for things and put it through and its a mess to get it sorted out. I love automatic bill pay with my bank however since I can log in, put in the accounts I am paying and they pay the bills for me. LOVE IT. Other companies don't have access to my account information (also a reason I don't like to use checks either, they have your address, routing number checking account number, everything they need pretty much...) you also never know when an unscrupulous employee might pull info as they are quitting or skimming it happens. I prefer that companies have as little of that information as possible--it's sad that's the world we live in, but it is.

The danger I see, even with a legitimate company is that should you lose your job or source of income, the funds dip down low and they are still taking money out. You may call to stop it, but be aware, some companies may tell you that it can take two weeks or even a month to get it into the system and that your next payment will still be taken out. So have enough money in there to pay 3 months worth of bills and you should be all right.

I haven't read the other responses, so sorry if this is repetitive. I'm not a Dave Ramsey expert, but I know a little about him. I think the reason he cautions the automatic withdrawls is because the creditors have access to the accounts, and sometimes it's in the fine print that they can take out more than you expect, leaving your account dry. Usually that can only happen if you fall behind on payments. So if you are NEVER late, and ALWAYS pay EVERYTHING on time, there's really no reason to fear automatic withdrawls. Most people that religiously listen to Dave Ramsey are trying to get out of debt or get more financially stable because of poor financial choices in the past (like running up credit cards, paying things late, fees, etc...). If you don't have a problem with those things, you could do the automatic bill thing. However, on the flip side, you could set up a direct deposit type payment schedule with your bank instead of automatic withdrawls. That way, you go into your online account once a month and select which bills to pay, then the bank pays them. It's different than giving the creditors actual access to your account. It's just one small extra step for you to make sure the process is started each month. Once all the info is entered, all you have to do is click which one and click "Pay." I would really do that instead of automatic withdrawls. It also protects against overcharging or overbilling for something. You can dispute an amount more easily before it's been automatically paid. For example: We don't subscribe to text messaging services on our cell phones. So when we get a "spam" (advertisment) text message on our phone, we call them and say we'll pay the entire bill except " x, y, and z" charges for these unsolicited text messages. They always adjust the billing amount, and we pay the bill minus those charges. If we paid the bill automatically, they would have to reimburse us, or credit us for the next month's billing cycle. So, it's just easier to have control over when the money goes out. Sorry. This got way longer than I planned. But hopefully it helps. Good luck!

we don't do automatic bill pay for everything, and we do use automatic bill pay for other things. You can't trust any company. Mostly we pay bills online ourselves for things like insurance, and that gas bill. I think if you don't owe very much and you trust the company it's not as risky as it could be.

Obviously the biggest benefit of AWs is that you'll never forget to pay a bill...just make sure there are enough funds in your account! And try to review your online account once a day (or every couple of days) just for a sanity check that everything looks OK.

TIP: make sure you write down somewhere all the companies withdrawing from your account automatically in case you have to close/change your account quickly. We had a check stolen and the perp tried withdrawing from our account so we had to close it immediately. We had companies we forgot about that didn't get paid until for a month or 2 until we figured it out.

Well, I don't know why Dave Ramsey doesn't like it, but I know that I don't like to use automatic withdrawl unless I have to. That is because it takes the control of paying your bills out of your hands and if you end up tight on money one month and the bills happen to come out of your account before your check goes in, you get screwed and end up with TONS of bank fees and a negative account. I just pay all my bills in the 3rd or 4th week of the month each month and I dp pay them online but I know that if I have to wait for a check I can.