Automatic payments Not all automatic payments are made equally. In this post we will talk about the different kinds and the ones that I like the most. First off, I would like to say that I think that automatic payments are a simple way to improve your credit and pay down debt. It is a no brainer, and you can set up your payments to come out on the same day as you get paid so the money is accounted for as soon as you get it… that way you cannot spend it on other things. I will almost always suggest to my clients that they set up all of their debts and liabilities up with the minimum payments with autopay and then add the additional debt payments when they have the extra money. Push vs. pull: Push payments are payments that you push out to your creditors whereas pull payments are ones that you have set up for the creditors to take the money out of your account. While I have a pull payment set up for my cell phone I prefer using push payments whenever possible. Currently I live in Germany and the cell phone company requires a pull payments. Some companies really don’t budge on their payment policy. I prefer push payments because when you give creditor your banking information you are leaving yourself vulnerable to their policies. Everyone is in different financial situations… some people may even be in a spot where they are unable to make all of their minimum payments, which means that they are going to have to choose what to pay and what is going to have to go late. Pull payments are harder to stop because you have given the control to the creditor. Note: Some banks might charge you for push payments, so make sure you know whether or not it is going to cost you extra to make payments in this way. Bill Pay: Many banks offer push payments in the form of “bill pay.” This can sometimes be confusing. Make sure that you look into how the bill pay works. At some banking institutions they write an actual check and send it to the billing company, which means that you must factor in the time it takes to mail the check. This can sometimes cost money, and other times the bank that you use will offer your incentives for using this service… the best policy when it comes to money is to make sure you do your homework and ask questions. Bank Transfers: Some of your creditors may actually be banks or be set up like banks. In these instances you can set up push payments by simply linking the accounts through YOUR bank. If the creditor can give you an account number and a routing number for your account you will be able to transfer money as a push payment/transfer. We did this with our car. We did not have an account with ENT but our car was financed by the car sales company through ENT… therefore I linked up the bank accounts and had it paid automatically with a bank transfer, which is normally a free transaction. Paycheck Allotments: Some people love paycheck allotments because the payments come out of each paycheck evenly before the paycheck ever reaches your account. I am not really a fan of allotments. I think that they make the paycheck a little bit confusing. You are not really in control of the payment process… which is probably what some people like about it. If you need to change or stop an allotment it takes 2 weeks or more. Finally, when you over pay an account you have to wait to get the money back, you cannot make partial payments. But if you are the type of person who cannot control their spending and will spend the money that is obligated to other things, then maybe allotments are good for you. Becoming financially capable also means that you have control over your behavior. Dave Ramsey says that Financial Peace is only 20% knowledge and the rest is behavior. So if you are relying on allotments to make sure that you are paying your bills then it might be time to sit down with a financial counselor to see what behavior modifications are in order to help you on your way to financial freedom!
Posted on: Tue, 27 Aug 2013 07:22:54 +0000
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