The Dangers of Automated Online Bill Pay

December 10, 2006

My credit card bill was three weeks late! Due to an online bill pay snafu, I didn’t receive a bill and wasn’t aware of it until the following month’s bill!

Cost of Convenience
I’ve been a big fan of online bill pay over the last few years but it has it’s downsides as well. I use an automatic bill pay system for all my payments because it saves me time, creates great electronic records, and helps me avoid missed or late payments.

The hands off approach that automated online bill pay provides for me is convenient. However, this convenience can lead to cash flow issues or payment errors if not monitored properly. Following are some of the potential dangers of automated online bill pay to watch out for.

Paying a Bill You Don’t Owe Anymore
A good example of this would be cable TV or telephone service. If you cancel your service partway through the month the company may have already sent the bill to your bill pay service. If you don’t remember to stop the payment, the service will pay on a bill you don’t owe anymore. Good luck getting your money back once your former company has their hands on it.

Paying More Than You Owe
For example, I pay our daycare expenses with bill pay. Our babysitter doesn’t send me a bill; I just set the payments to go out automatically every week. Some weeks we may take our son fewer than 5 days for a variety of reasons. In our busy lives it’s easy for me to forget to update the payment to reflect the lower costs and easy for her to overlook payment for an extra day or two.

Paying a Bill You Don’t Have Money to Cover
The good thing about automatic bill pay is that it sends your payment for you. However, this can be a bad thing if you don’t have money to cover the payment! I always pay off my credit card balances in full every month but I do a lot of moving money between my ING Direct account and my checking account to fund the payments. There have been times when I had to do some last minute money maneuvering to make sure there was enough money in the account to pay the bill.

Assuming All Bills are Paid Automatically
I recently changed my website login for my credit card. As a result my online bill pay company was unable to retrieve my statement and the monthly credit card payment was not sent. Since my bills are usually paid automatically if they’re under a certain amount, I didn’t know I missed a payment until looking over the next month’s bill. I guess the moral is, check your statements regularly, even if the payments are automated!


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Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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