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Pitfalls of Automated Bill Payment
theodp writes "A few months ago, the NY Times' Ron Lieber extolled the virtues of allowing utilities, phone, and credit card companies to pull whatever you owe from your bank account. Big mistake. Lieber's readers fired back, telling him he was out of his mind for suggesting that they give billers unfettered access to their credit cards and bank accounts. Now Lieber goes through five of the glitches that can occur with any of the various methods of setting up automatic payments: 'You can give each biller permission to pull the full amount from your bank account. You can use the online bill system at your bank to push payments out automatically each month. Or you can charge every bill to your credit card and give only that card company permission to pull money from your bank account when the credit card bill is due. Each of these methods has its potential shortcomings ...'" What kind of payment automation do you use, and why?
http://www.paytrust.com/
Most of my bills are transmitted electronically. The rest are mailed to Paytrust's P.O. box, and they post the scanned PDF for my review.
I set the payment rules via their website: pay full amount, pay full amount up to [limit], pay specified amount. Or I can just wait for the notification in my email and pay it myself with a few bill clicks.
Over here (the netherlands) lots of people use direct debit. It's safe and convenient and it doesn't give anyone unlimited access to anything. If you give permission for a regular direct debit to a company you can at any time cancel this with your bank, you can also undo an automatic withdrawal (within a timeframe of 2 weeks after the withdrawal iirc), no questions asked.
Also, people rarely use creditcards here, everyone uses direct debit cards, which are secured with a PIN code. Cheques are not used any more. If you need to transfer some money to someone you usually transfer it directly from your account to theirs.
This has been common practice in Germany for as long as I remember (or live). If you do notice an illegitimate transfer, you can tell the bank to undo it, at which point it is up to the company again to bug you about the money. I think all in all, it's less hassle to just check whether all deductions are legit than to manually transfer money to your billers.
Because it's cheaper?
Over here in the UK some companies give you a discount on your account if you pay by Direct Debit (basically an instruction to your bank to give the company whatever they ask for each month). I say 'discount', of course it's really an extra fee for doing the work yourself. If you pay online with a card you pay extra. I think for my phone company it's an extra GBP4 per quarter.
Companies over here love Direct Debits. Every bill comes with a 'why not pay by Direct Debit?' leaflet. Sadly there's no tick box for "I really don't trust you". Stories of epic fails with DDs are legion - an extra zero on the bill makes the person go overdrawn, they get a bad credit record, they lose their house, they kill all their family and so on. I exaggerate. Slightly.
Sometimes I feel I'm the only one not paying by DD, but that's what they want me to feel...
I had to CLOSE a bank account to keep Verizon out of it. They first drew more then I owed them from it, then after I told them I wanted paper bills that I would pay myself(they also tried to charge me for the bills), and to not auto-pay anymore, they promptly attempted to draw the same amount, found they had no access to it and charged me an insufficient funds charge. I believe that was entirely intentional.
That was enough for me. Nobody has access to any of my accounts but myself. Not even my wife. That way when I have a charge to my account, I can ask to see my signature on something specifically authorizing it. No signature? Not my problem.
The hassle of dealing with idiots like that FAR outweighs the convenience of auto-pay.
I live in Canada and pay all of my bills through my bank's web site. As much as people like to rail about the lack of competition in Canada due to the fact that there are only five chartered banks for the entire country (other than credit unions, but they are provincially regulated), all five of the chartered banks offer sophisticated on-line banking (some more sophisticated than others). Hell, I even paid my property tax to the City of Calgary on-line. There is no futzing around with the biller in question and arranging electronic payments, you simply add them to your payee list on your bank's website.
Now, I could set up automatic bill payments, but I had a bad experience with the Royal Bank and a student loan; that isn't going to happen again.
My favorite part, if you've RTFA to the very end, is this:
UPDATE In last weeks column on socially responsible investing, I mentioned an exchange-traded fund called the HealthShares Emerging Cancer Fund. What I failed to notice, because the company hadnt bothered informing potential investors on the funds own home page, was that the day before my deadline the company announced it was shutting down the fund in September.
Now here is someone you should definitely listen to.
Indeed; and there's a specific guarantee with Direct Debit, a phone call to the bank will get the money back immediately and it's up to the bank to chase the creditor not you. Creditors must warn you in advance if the payment amount changes, in writing, and you can cancel it at any time. Also creditors are vetted (a little) before they get the facility to allow you to setup direct debits.
The only problem I've had is with electronic DD where you don't need a signature to set it up. I've had a couple of direct debits setup for mobile phones because a cheque book was stolen a few years back; however my bank notifies me in writing every time a new direct debit or standing order is set up so I can check it (ok it's not a useful letter, they send me the reference number for the DD and the reference number for the organisation that set it up; I have to go on-line and review them where I can actually see the name of the organisation, but it's better than nothing.)
I was an early adopter with Paytust (back when they were PayMybills.com). They were bought out by Intuit. I'm still with them today. Here's why:
BORING: Yes, you can do the simple bill payments that you can do with many bank accounts now. You can send a check to a name or an address for a certain amount, perhaps against a specific account number. They'll put everything together and mail out the payment for you.
EXCITING: What makes this service shine is bill RECEIVING. You got bills that come to your house? You change your billing address. You give them a special PO BOX # that is provided with your account. Paytrust will scan the bill in as PDF format. They'll pre-populate the bill's data into your account, matching it with one of your known billers, and doing the data entry for the minimum amount due, the total amount due, and the due date.
In my case, I still micromanage. I get an email from them saying that some new bills came in (and provides the basic details of the bill that I just mentioned). So, most of the heavy lifting is done for you so that when it comes time to pay the bill, it is just 'click a checkbox', 'click a button', and 'click a button to confirm'.
You can set up autopayment rules (which I haven't done) to auto-pay a bill if it is under a certain amount, or to pay off the full balance, or pay against the minimum due, or whatever. I know that they've got some flexibility there.
They're got some added protection for detecting duplicate bills (more than 1 bill in a billing cycle), and also, more importantly, the 'missing bill', to let you know that normally you receive a monthly bill from a company, but nothing ever came.
ORGANIZING: If you read between the lines to see the net effect of all of this, here it is. Basically, I log onto their website. The main screen tells me the bills that I have yet to pay. The bills that I have paid will drop of of that screen. So I instantly know, at any given time, what has or hasn't been paid. Which is so useful to me, I haven't had a late payment on anything since I adopted their service. That has contributed to my credit score reaching a very nice level (and my avoiding late penalties, and punitive APR increases).
RESEARCH/HISTORY: A scan (again, PDF) is kept online for a year (after which, they offer archival CDROMS. So you can go back and, say, figure out when a charge was put on, or when you interest rate changed, or how much electricity you used a year ago. Totally worth its weight in gold in doing the kind of research that only the most organized freak could do before.
You've also got a good summary screen of every payment you've ever made through the system, so you can find out, say, what were the last 10 payments I made to Chase?
Small unexpected but appreciated service: if my credit card company sends me a credit card, or I get a really weird non-bill letter (that isn't spam), they'll forward it to my real address.
So, I hope I don't come across as a shill for these guys, but I'm absolutely a great fan. Their service has really saved me so much time, money, and frustration over the years. One of the best kept secrets of the web, IMHO.
If you use automated payment, if the system fucks up, you'll personally spend hours upon hours on the telephone with said company trying to get the insanity dealt with. "No, no that's not what our system says here sir, the amount we deducted from your account is US$45.97" "But you deducted US$495.70!" "No sir that is not what our system says". It will take days, if not weeks, to get things straightened out.
That's the problem with your system, right there. Here's how it works in the UK:
(Call utility company)
"You charged me £495.70"
"No, we charged you £45.97"
"Refund me £495.70 now, or I'll get my bank to take it back from you.
(In the unlikely event that they refuse, call bank)
"I've been overcharged on a direct debit. Can you refund it for me?"
"Certainly. What's your account number?"
It'll take ten minutes to deal with, maximum.
Yes, this has happened to me.