In the conversation about automatic bill-paying a few days ago, some commenters remarked on the preferability of setting up your accounts so that you can go online to transfer money to creditors electronically. This is different, of course, from allowing a creditor to engross money directly from your account according to what it thinks you owe.
The credit union would far rather have customers use this EFT strategy for payments, especially (so they tell me) where insurance companies are concerned—the CUs rep said that insurance companies are egregious about ripping off customers and that it’s difficult to disconnect them from an automatic payment plan. They just ignore requests to quit grabbing cash out of the customer’s account. And I will say that toward the end there, Qwest went amok with stealing money out of my account that was not owed…and that indeed, they eventually refunded. The refunds didn’t help my cash flow, though, when I needed it.
I knew better than to pay Qwest automatically but was lulled into a false sense of confidence after several years of decent service and straight dealing (those latter must have been unintentional on the company’s part). And there’s not a chance on God’s Green Earth I would let The Hartford or any other homeowner’s or auto insurer have access to my bank account.
But I do use this arrangement for the utility companies, for my long-term care insurance (only because GDU kept screwing up the payroll deductions), and for a whole life policy whose premium has not changed in 30 years. Except for the long-term care insurer (which I would not pay this way except that there’s no other choice), all the other creditors have proved that they do not systematically cheat customers (except to the extent that our defanged regulators allow), and so I don’t feel the system poses much risk.
And it does have a single, sterling advantage for an aging single woman: if anything happens to me, the bills will be paid until I can get out of the hospital to deal with them or until my son can get a grip on things.
It’s an advantage, too, in a household where one person handles all the finances and the other person hasn’t a clue. One of my friends learned this when her mother, who lived in another state, had a stroke. Her father had never so much as opened their checkbook and was utterly naive about their money situation. He didn’t even know how to pay the bills! Fortunately, the mother had put all their utilities on automatic bill-pay (they came due right about the time she fell ill), and so my friend was spared the hassle of figuring out how to keep the lights, gas, and water running from halfway across the country.
That advantage alone, I think, outweighs the possible risks. You have to be careful, of course…never let a telecom company extract funds from your checking account, because they are in the business of ripping off customers. But utility bills, at least for the time being, can be safely paid this way, so that your lights will stay on if you’re temporarily put out of commission.
I only trust Vanguard and Sallie Mae with EFT. All other bills are auto/online pay (I have to authorize the transaction) or auto charge to my Amex (where I could dispute a charge if necessary).
I worked for State Farm for fifteen years, and they were excellent about stopping automatic payments when called for, though they did need a few days notice. Even when they didn’t have the requested notice they always tried to stop the withdrawal, and were often successful.
If there was an error on a bill (very rare)and there was enough time to correct it before the withdrawal, it was done. If there wasn’t enough time a credit was given on the next bill.
Perhaps I am naive, but I don’t think these companies are out to get us. I think when there’s a problem it’s an error, and if they don’t correct it immediately it’s much more an issue of incompetent staff/management than any scheme to rip us off.
I do EFT for every thing I can. I’ve only ever had a problem once – and that was with a telecom company. They mistakenly pulled twice for the same month, and it took me three months and lots of aggravation and escalation up the ladder to get it refunded. That was bad service, and I dropped them shortly thereafter.
It’s important to know the policy of each company you’re dealing with. Under what circumstances will they allow you to suspend the withdrawal, and how much notice do they need? If you think there’s a possibility you won’t have money every month to pay your bills then don’t agree to pay by EFT. Then again, if you have an emergency fund you’ll have a cushion if there is ever a billing error. I have my mortgage deducted from my savings account so there never a possibility that there will not be money available. I also maintain another checking account at the same bank so if there was ever a problem I could just shut down my main account…
I don’t think it serves us to assume an entire class of company is out to cheat us (well, except for car dealerships and their finance managers). It pays to be careful and cautious and smart, to be sure. But to quote the Jacksons, “one bad apple don’t spoil the whole bunch, girl.”
🙂
Oh, I forgot to add that most of my bills do go to my credit cards for just the reason Elliott gave, and for the additional rewards I get. 🙂
My husband and I use the online bill pay where we have to authorize the payments. The mortgage is the only thing that comes out automatically. Though I am comfortable with online transactions, my mother doesn’t trust them at all. I had never thought about what would happen to a single person like my mom if she were incapacitated and missed paying some bills. Depending on when it occurred during the billing cycle, even a two week hospital stay could really mess things up. Your post inspired me to talk to my mother today about making a list of the bills she has that I would need to know about and take care of if she did end up in the hospital unexpectedly. Thanks for this post. You may have saved my mom and me some trouble down the road.