Whenever the topic of financial management comes up for discussion, the one thing that is generally stressed upon the most is the automation of payments. From utility bills to mortgage payments, credit card payments and healthcare payments, automation can be applied to a wide range of regular expenses.

It helps in ensuring that all bills are paid on time and in a simple and convenient manner, besides making financial management relatively hassle-free. However, gaining a better understanding of automated payments is quite essential.

A Brief Overview Of Automatic Payments

Automatic payment enables creditors to withdraw a sum equivalent to a given bill amount from an individual’s account on a specific date. These payments are set up directly with the companies offering credit to the users. It can be set for a specific amount or even a variable amount within a specific range. People often confuse automatic bill payment with the recurring bill-pay feature offered by many financial institutions. However, while the latter facility is offered by banks to their customers, the former requires the customers to give permission for a company to take payment for their services directly from their bank account.

Understanding The Pros And Cons Of Automatic Payment

Like any other financial service, including payday cash loans, initiating automatic payments comes with its own set of advantages and disadvantages. Being aware of these pros and cons is essential to help individuals make an informed decision about availing of this facility.

Pros

It is extremely convenient: The most important benefit of automating bill payments is that it enhances user convenience quite significantly. People do not have to worry about remembering bill payment dates and amounts or write the cheques for the same and then deposit the same within a specified time limit. They can simply relax and enjoy the freedom of all the bills getting paid well in time and without them having to lift even a finger.

It minimizes the risk of late fees and penalties: Using automatic payments ensure that all dues are cleared within the specified time limit. This minimizes any risk of a late fee or penalties levied on individuals due to the missing payment deadlines. This can, in fact, go a long way in enhancing the financial stability of individuals and even helps them improve their savings.

It reduces the stress of managing bills and payments: Individuals using automatic payments do not need to worry about managing different credit lines. The only thing they need to worry about is to have enough account balance to cover multiple bill payments. They can thus focus better on improving their avenues of income and stabilizing their finances.

Keep track of various expenses in a hassle-free manner: Automated payments make it easier for individuals to keep track of their expenses in a hassle-free manner. They simply need to view their account statement to learn how their funds have been utilized. This further enables them to cut down unnecessary spending and focus more on savings.

Cons

Funds shortage can affect credit score: Funds shortage can lead to payments getting bounced and this can have a negative impact on the credit score of an individual.

It can create a false sense of financial security: Automated payments eliminate the pain of money leaving the hands of individuals. This can create a false sense of financial security and make people somewhat careless about their funds.
It can lead to financial laziness: Not having to worry about paying bills physically on their own can make people reckless about availinginstant loans for bad credit. They may feel too relaxed to work hard and seek new ways to increase their income, which can prove really disastrous in the long run.