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How to Stay in Control of your Automatic Bill Payments

by Diane

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Putting your finances on autopilot is a great way to stay on top of your regular bills and savings.

Setting up automatic bill payments helps reduce the possibility of missing a payment and getting hit with a late fee plus it can remove or at least reduce any anxiety you might feel when it comes to your overall financial situation. The big bonus is that it also frees your energy and focus for either making more money or finding extra savings, or both.

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I schedule the bill payments for my various utilities bills so they’re paid automatically from my credit card. I use my credit card for these automatic bill payments because it suits my banking and mortgage set up (line of credit) and I can take advantage of my credit card’s reward program. You might want to set up your automatic bill payments from a savings account if you’re not used to using a credit card or don’t want to.

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How to set up automatic bill payments

Typically, utility bills vary depending on various factors, for example: the time of year. If you’re going to automate your payments you’ll need to work out the average amount for the bill.

Water Rates – Total for the year =$896

Average payment per month ($896 divided by 12) = $74.66

Monthly scheduled payment = $80.00

The above example shows my own water rates for the year. Not surprisingly, the quarterly bill varies greatly depending on the time of year and the number of people in the house. During the summer quarter, the bill can be over $450!

The first step is to add up your last 12 months worth of bills, then divide by the frequency of your schedule – for me it’s monthly. I then round up the amount to pay to the nearest $10. Over time, this small amount helps to build a buffer that can absorb any unusual fluctuations in your actual billed amount. It can also build a bit of insurance into your payment plan. Let this small amount build over time and you’ll find you’re a whole billing period ahead in your payment. That peace of mind can be priceless if times get tough. Also, be sure to begin your automatic bill payment with enough time to accrue the whole amount for the next bill or you might have to make an additional payment or two until you build some credit on your utility company’s bill payment account.

Automatic bill payments are a great way to pay regular bills but, who's controlling your money, you or the utility company? Here's how you keep control...

Staying in control of your automatic bill payment

Why do I automate my bill payments this way when I could just as easily set up a direct debit with my utility company?

It’s an easy answer; this way I have control over the payment.  When you set up a direct debit or any sort of automatic bill payment where the withdrawal of your money is initiated by the utility company (or any service provider) they are controlling your money, not you.

There are many horror stories featuring this exact scenario; The Budget Mama shared one just recently. The withdrawal from your account might be a simple error and will eventually be fixed and the money returned but, it could amount to hundreds of dollars, what will you do in the meantime? How much extra (unnecessary) stress will it create? It’s a much better idea to always stay in control of your money. Make sure you’re the one sending the payment never let anyone take the payment.

Other options for automatic bill payments

I like the set and forget nature of automating my bill payments via my credit card, I also like the reward points that accrue, but this isn’t the only way to create automatic bill payments. You can also set up scheduled payments to another savings account that’s designated just for bills and then send an automatic bill payment only when the payment is due. This way, you can keep the money in your own account where it might accrue some interest for you before sending it off to your utility company.

Or, you can automate everything up to the point of paying your bill and do that part manually so you pay only the outstanding amount.

I’ve been using this method of automatic bill payment for a long time and have managed to build a credit balance on all my utility bills that means I could choose not to pay any these bills again for at least six months. If I ever decide to stop making those payments, it’s a quick and simple process, no dealing with gas company accounts departments.

Have you scheduled automatic bill payments? Do you control them or are they direct debit?

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Karena - 1:27 pm

Hi I’m new here. I’m a self confessed Minimalist & Frugal lover in Victoria Australia. Our family lives on one wage ( with 2 teens) not because we have to but because we can due to our mindful spending and simple living with only small Mortgage remaining.. And no that one wage is not six figures like most would assume, not even close. I am huge fan of Automating everything and I pay the utilities monthly. Company works out monthly amount and its automated so you never have to make a payment.. BUT I love your twist on it to automate from the credit card then I’m in control and can adjust when I want or need to great tips thanks so much.. As it surely can be a pain to ring them to adjust which I do 2-3 times a year. I’m getting on this now to cancel from Utility companies and setting it myself via credit card.. Looking forward to reading your other Posts..

Diane - 9:24 am

That’s awesome Karena!

Everyone thinks it’s important to be home with your kids when they’re young but teens need us to be there just as much. At least, they need to *know* we’re there but they don’t necessarily want to be seen with us! 🙂

Nate M @ LendEDU - 7:47 am

I only have one automated bill that has the option to set a limit on how much can actually come out of my account automatically. It’s a good thing it is typically my highest bill. I think more companies should add this feature!

Diane - 8:54 am

That is a great idea – I wonder why they haven’t already?

Tracey Hynes - 7:05 pm

I use direct debit to my credit account but always make sure that I pay the full amount off at the required payment date. So in essence get a free month before the payment is made.
Also I budget every year to make sure my income can pay the bills. In doing that I budget for future costs to be increased by a 6% on the previous year’s actual cost to ensure I cover inflation.
However I love the payment plans and if I didn’t have credit would definitely set them up where ever they are available.

Diane - 9:36 am

Good idea to build in some room for inflation. I love the ‘set and forget’ aspect, too.


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