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?

Comments

I don't.

[Leptok]

End of story. Why give them the access when it takes 10 minutes to simply do it myself?

Re:I pay online

[Daengbo]

I use the "get my ass to the post office method. I'd pay online, but Korea uses an ActiveX plugin instead of SSL. Even if I had ActiveX, there's no way I'd do that.

The fact is, US banking is backward

[Kupfernigk]

Speaking as someone who has been a local director of a US corporation and then a general manager in a company with a US subsidiary, the biggest issues are simply that US banks are technically backward compared to Europe, and that you have no Data Protection Act.

In the US it has been made very easy to set up a bank -with the result that many people, some with fraudulent intentions, do just that. (At the other end of the scale I know of a small community of professional people that set up its own bank just because they didn't trust the big ones, and it was very successful. I am not suggesting that Americans are less honest than Europeans, that is far from the truth.) In Europe the banking system has deep roots in the Jewish community becaue Jews were discriminated against - they could not own land but were allowed to charge interest - and this tension has created what is, on the whole, a very successful and honest banking system. (In fact in the UK banks were also started by nonconformists like Quakers for much the same reason - Barclays being an example.)

The result is that until the madness of the last ten years our banking system was very trustworthy and we were prepared to believe in direct debit systems - which on the whole work very well. Meanwhile in the US banks were still settling interbank transfers with bits of paper, and this is still an issue today - in Chicago we had to set up an account with a subsidiary of the (British) NatWest just to avoid ludicrous delays and overcharging for simple transactions. This is ultimately because in the UK many bankers knew they were less than honest, and so were not inclined to trust other banks. The present credit crisis is because, after years of unregulated credit and junk assets, banks have discovered once again that they cannot trust one another. Paypal is an example of a system that was set up to deal with what is really a US problem, not a general problem.

The answer to direct debits is to make the system as robust as European systems - which make the person asking for the money extremely liable if they make a mistake. But this is unlikely to happen, because US law favours corporations over individuals. And, given Obama's choice of running mate and his connections, voting either way in November won't have any effect.