What Is the Account Name Mean When Setting Up Auto Payment in Blue Cross
Everyone should set up automatic payments if they can. With so many aspects of our lives becoming digital and on the go, it only makes sense to ease the burden of remembering when to pay a bill and doing it manually.
It's hard to believe that not long ago we were all using checks to pay for things like rent and car loans. In fact, I have a family member who still does it—and it drives both of us crazy.
He gets frustrated because he has to sit down every month, review his bills, and write checks for each of them. I get frustrated because it's crazy to think that anyone would still pay bills like this!
So, in tribute to this unnamed family member of mine (I'm sure we all have them), I will cover everything you need to know about automatic payments in this article—including what they are and why you'd use them.
What are automatic payments?
When you make an automatic payment, you're telling your bank to transfer money on a set date and for a set amount, to pay a bill. Automatic payments are made with either a checking account or credit card, and in most cases, you'll do this with the creditor or vendor directly, but it can also be done directly from your bank.
When done with a credit card, automatic payments act simply as a recurring charge on your account. For instance, you might do this with your Netflix account. In this case, you add your credit card to your account and Netflix charges you every month. Done.
When you pay with a checking account, it's a little different. In nearly every case, the payment is made via ACH—Automated Clearing House—which is an electronic payment system. This essentially routes the funds electronically from your bank to the company you're paying (such as your credit card bill).
How do you set up automatic payments?
Automatic payments have become incredibly easy to set up.
Go directly to the vendor
The first method is to go directly to the company, vendor, or creditor you're trying to pay.
For example, say you have a $400 car payment, with the loan funded through Chase. You can log on to Chase's website and set up an automatic payment to be taken out every month when your bill comes.
You would simply enter your checking account information and choose a date for the payment to come out each month. In many cases, you can select for the payment to be delivered on the due date or several days before.
Go through your bank
Another way to do this would be to set up an automatic payment through your bank, which a lot of people prefer.
Say your checking account is with HSBC. You'd simply log onto your account and go to the bill pay section. From there, you'd enter the information directly from your Chase bill—such as the account number and the payment address.
If your bank has the vendor's electronic payment information, they'll make the payment through ACH, as I discussed above. This means it'll be paid electronically and takes a day or so to arrive electronically. If they don't have your vendor's electronic payment information, a check will be automatically generated, printed, and sent to the vendor. A good example of when this would happen is a smaller utility bill (this happens with my sewer bill, for example).
Use your credit card
Lastly, you can always plug your credit card information in to pay a bill that accepts cards. An example here would be your cell phone bill.
Say you have your bill through Verizon. You'd merely log into your online account with Verizon and set up an automatic payment (usually done through their "payments" section) by entering your credit card information and selecting a date for it to pay; I've found that Chase Freedom Flex℠ has a particularly easy-to-use mobile app.
Why use automatic payments?
The concept of making automatic payments is the same as paying yourself first. In the book, The Automatic Millionaire, author David Bach talks about the importance of automating your payments—both to yourself and to debt such as a mortgage. There's not only math behind why it makes sense, but there's a level of psychology, too.
Set it and forget it
When you set up automatic payments, it's a true "set-it-and-forget-it" system. The moment you give yourself the option to pay a bill, the moment you become stressed about it and potentially put it off and forget about it. When you have automatic payments, you take that thinking away from yourself and your bills are paid on time, every month.
You'll stop missing the money
So the benefits include not having to worry about missing a payment, but you'll also begin to not miss the money. For example, if you set up an automatic payment for your rent every month, you'll eventually get much more comfortable with what your true spending ability is. PNC does a great job with this by accounting for automatic payments that are upcoming and telling me what I actually have to spend.
How to stop automatic payments (and why you'd want to)
Stopping an automatic payment is as simple as it was to create it. If you set it up through your bank, you'd go into your bill pay section of your online banking platform and cancel the auto or recurring payment. If you set it up through the vendor directly, you'd just log onto that account online, head to the payments section, and stop your automatic payment. Finally, the same can be done if you're paying your bill with a credit card—just go into the payments section and cancel the automatic payment.
So why would you want to cancel your automatic payments after I just told you how relieving it was? Well, there are certain situations where it just doesn't make sense. Here are a few:
1. You're paid irregularly
A good example of this is if you're a freelancer. Sometimes as a freelancer, you don't get paid on the same day every two weeks like you would with a corporate job. In this case, automatic payments might not make the most sense because you may not have enough in your account when it comes time for the bill to be paid.
Now, ideally you'd plan ahead and set aside some money for this, but that's not always easy to do. Some people might receive a lump sum of cash and make two or three months worth of payments at once for example (this is common with car loans)—so again, in this case, an auto payment might not be the best choice.
2. You've lost your job
Obviously, if you've lost your job you won't have regular income coming in like you used to. In the event you lose your job I'd recommend stopping your automatic payments and working with your creditors, landlord, utility companies, etc. to work out a payment plan.
This might mean you agree to a new dollar amount and set up an auto payment again, but by stopping the auto payments, you eliminate the risk of overdrawing your account when you're not expecting it. Yes, you should still pay your bills, but this is a time where you might need more control over when and how they get paid.
3. You're a control freak
Hey, this isn't a bad thing. Some people just don't like automatic payments because it's a feeling of loss of control. While your payments are being managed for you, some people like to make multiple payments during the month and for different dollar amounts.
I know a lot of people who do this with credit cards, for instance. They use them like a debit card and make a payment every few days or once a week for whatever their outstanding balance is.
Summary
I am a firm believer that everyone should set up automatic payments. I did lay out a few circumstances where you might want to cancel them, but even in those situations, you can find ways to make payments automatically that still work for you and your budget.
With that being said, I think you should at least give automatic payments a shot if you haven't already. With so many aspects of our lives becoming digital and on the go, it only makes sense to ease the burden of remembering when to pay a bill and doing it manually. Also, with as many subscription-based services as we're using now, setting up automatic payments will make your life a lot easier and take unnecessary decisions off your plate.
Read more
- Pay Yourself First: This Simple Strategy Can Make Anyone A Millionaire—Why Not You?
- Which Loan Should You Pay Off First? A Guide To Tackling Your Debt
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Source: https://www.moneyunder30.com/automatic-payments-explained