Paying bills by mailing out checks was common when I was growing up (1970s and 1980s), but no longer. Now, most companies have the option to accept payment by credit card or ACH debit (and if they don't, you wonder what's wrong with them). Not only that, but you can make arrangements with the companies to have them bill you, and collect from you, automatically.
Automating the paying of bills has a number of very compelling advantages for customers:
- It's convenient. No more signing checks, or licking envelopes and stamps. The charges appear right on the monthly statements for easy tracking.
- It's reliable. Once in place and left undisturbed, the payment comes out before it's due, every time.
- It's less costly. Stamps and envelopes cost money. Getting the things ready to mail costs time.
These advantages also apply on the business end:
- It's convenient. The money just magically flows into the account.
- It's reliable. Once set up, not getting the money requires some action on the customer's part (they have to opt out or not have enough money in their account).
- It's less costly. There are fees associated with the transactions, but they're generally less than what it would cost to pay staff to process the checks.
For all its advantages, though, auto-pay isn't quite “set and forget.” It's very good on convenience and reliability, but not perfect. Why isn't it?
Blame it on physics!
I sneaked the caveat in while your back was turned. (Sorry.) But it's very much similar to Newton's First Law of Motion:
Newton's First Law of Motion: Every body tends to remain at rest or in a state of uniform motion unless acted on by an external force.
From this stems Mighty Bargain Hunter's Law of Auto-pay Continuity:
Mighty Bargain Hunter's Law of Auto-pay Continuity: Every automatic billing agreement tends to continue reliably unless some billing action acts to halt the agreement.
The caveat is here: Auto-pay is reliable once in place and left undisturbed. Any number of things could disturb this agreement, and it usually involves some change in some part of the billing process. The conditions of these changes may be buried in the service agreement for the autopay, or they may not, but in any case, the Corollary of Auto-pay Pessimism holds:
Corollary of Auto-pay Pessimism: Failure to pay for services rendered, even if failure to pay is due to an auto-pay agreement that was halted suddenly or even silently by the company, is the fault of the customer.
Case in point: A user on the money StackExchange site had his credit rating drop when something got mucked up with the automatic bill pay of his utility company. He claims that his automatic bill paying stopped, without any notification to him, when he opted in to paperless billing. I don't have any reason not to believe him — and it does suck a little that this happened to him — but I still think that in this case it would have been up to him to be vigilant about making sure the payments were still coming out of his accounts on time.
Companies protect their interests, but they're not evil
The service agreements, and automatic bill-paying agreements, are written by the companies for the benefit of the companies. They have verbiage that places burdens like these on the customers, and absolves them of liability. So, even if halting the bill-pay agreement was flat-out wrong and done without any notice, it's still on the customer to pay.
At the same time, I don't believe that companies are malicious, and even if they were, they wouldn't deliberately cancel someone's auto-pay agreement just to wreak havoc. They want to get paid on time. Forcing things to collections, notifying the credit bureaus of late payments, etc., all cost them money. It would be stupid of them to do things to interrupt the smooth flow of money into their coffers.
This being the case, it makes most sense for customers to double-check that account actions don't have unintended side effects. Any account action outside of normal operations — change of address, change of bank account, change of credit card, change of service, and maybe even change of billing preference — should be followed up with verifying that everything else is still in place. If there are side effects, then they're caught sooner rather than later.
Any other horror stories about bill-pay that you'd like to share?
I use my bank’s autopay for everything except my Visa card payment, as it allows me to initiate the transfer. I’m only subject to the bank’s autopay failure policy, and it’s a local bank, which makes them very easy to deal with when issues arise. The reason for the Visa payment exception is that I always have it paid in full at the end of the billing period, and using their “pay in full” option makes it so I don’t have to go into my autopay every month and change the amount of the payment. Using a single auto pay method also makes it very easy for me to “stop payment” on a disputed bill.
Not a big fan of autopay for business. More than once payments to vendors have been “paid” through my bank’s bill pay system when made to small companies who aren’t set up for electronic payment (The service can be expensive for small businesses to set up and maintain.) That meant that the bank had to mail out a check to them. The bank was able to provide “proof” that the payment was sent but that was all. Getting it reissued was a bit of a hassle.
And this is why I’ll set up recurring payments with notification out of my bank account but NEVER allow any company to just come in and pull out money whenever they feel like it.
It all works out the same, except that I’m in control and I know when things are done.
I work for CheddarGetter, a recurring billing platform. CG offers price grandfathering, which guarantees a lock on pricing plans and eliminates the fear of surprise price increases.
As you noted, automated billing is a safe way to go for customers because of its reliability and convenience.
From a entrepreneurial perspective, automated billing makes sense for any size business because it makes the billing process more manageable and efficient, saving both the business and customer time and money. Automated billing works well when a customer has a recurring payment (typically on a weekly or monthly basis).
Yes, I agree, this is something that we definitely have to watch!