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How to Make Automatic Bill Payment Work for You

When it comes to paying bills, there are two types of people.

Some would rather not do it at all. They don’t enjoy all those numbers—ugh! So they put off paying bills or let their spouse take over because it just doesn’t interest them. We call those people Free Spirits.

Then there are Nerds. Nerds actually like the feeling of order and control they get when they pay bills on time (or early), and they’ve probably got a spreadsheet that shows all their payments for the last five years.

Neither personality is right or wrong—everyone’s either a Nerd or a Free Spirit. It’s just how you naturally handle money.

And the cool thing is, both Nerds and Free Spirits can benefit from automatic bill payment.

The Upside of Automation

Automatic bill payment is when you owe a company money for a service, and you agree to let them take that money out of your bank account at regular, preset times.

When that scheduled time rolls around, the company says to your bank, “Hey, I need this much money from this account.” The bank gives them the money, so you don’t have to do the nitty-gritty work of moving it around yourself.

Less Effort, Less Stress

Automatic bill payment is super convenient because it takes the pressure off of you. Think about all your bills: housing, utilities, cell phones, subscriptions, credit cards and probably some other debt. That’s a lot of due dates to remember!

Tracking all those dates sounds like a nightmare to Free Spirits. And you Nerds probably only remember because you wrote them all down on sticky notes.

With automatic bill pay, you don’t have to remember. You just schedule the payments and they’re taken care of—which means no more late fees and less stress. And you Nerds can move out of Sticky Note City.  

Better Schedule

Have you ever had a bill—or a bunch of bills—come due at the worst possible moment? Have you ever felt sick wondering how to pay them all and still have enough money left for groceries or even just a dinner out?

If that sounds familiar, you’re not alone. Seventy-eight percent of Americans live paycheck to paycheck.1 The crazy thing is, it doesn’t matter if they get paid once a month or once a week—they’ve still got too much month left at the end of their money.

But automatic payments can help you balance your money throughout the whole month so you’ve got enough to pay your bills—no matter when you get paid.

That’s because they let you choose your due dates. So you can make your bills due on or near payday, when you have the most money.

Now, that doesn’t mean you can just skip a month to reset the date. You’ll get hit with late fees if you do that. If you want a later due date, call the company and work it out with them.

Asking for a later due date can be good if you’re paid monthly and your bills are normally due right before payday. For instance, if most bills are due on the 10th but you get paid the 15th, you may want to ask the companies if you can push those due dates back a few days.

Or you can choose an early due date. It sounds counterintuitive, but it actually works—especially if you get paid every week or two.

Budget every dollar, every month. Get started with EveryDollar!

Let’s say you get paid biweekly, and your rent, phone and car payments are due the first of the month. You can spread out the expenses by scheduling the two smaller bills in the middle of the preceding month. So you’d pay the rent on October 1 but make the phone and car payments September 15.

If you got paid weekly, you could space them out even more: Just pay one bill per week from the middle of September to October.

Spreading your payments out like that helps you balance your bills and day-to-day living expenses, so you’re less likely to run out of money at a given time of the month.

Payment Safety

One of the biggest concerns people—especially Nerds—have with automatic bill payment is online security. They’re not sure if their financial info is really safe.

But it’s not like paying the old-fashioned way is foolproof. A mailed check can get stolen, giving the crook full access to your bank account, name and address. That’s a lot of personal info!

Besides, online security has improved a lot. Groups like the Federal Trade Commission (FTC) help businesses handle your personal info safely. And secure logins, payment processors and other security tools make it easier for companies to protect you during online bill pay.

The Downside of Automation

Automatic online bill pay has some drawbacks. Which is why you Free Spirits need to take a lesson from the Nerds: Just because something is safe most of the time doesn’t mean you can just sit back and never look at your bank account again.

But the Nerds can take a lesson from the Free Spirits too. Your job is to relax. You can take a couple of simple precautions to safely use automatic bill pay and save the effort of paying bills manually.

Here are three common problems and their solutions.

No Time Limit

Automated payments give companies indefinite access to your bank account—so your money will keep coming out until you cut them off.

If you’re canceling a subscription—whether you’re moving or just don’t use it anymore—make sure your automatic payments are canceled too. The last thing you need is to pay utility bills for the person who moves into your old apartment.

Withdrawal Mistakes

Either the company you owe money to or the bank can make a mistake when processing your automatic payment. It’s rare, but it happens.

And those mistakes can be hard to correct. Some companies and most banks will blame each other for the problem, because neither one wants to take responsibility or pay to fix it.

Fixing a mistake is a lot easier if you catch it early, so check your bank account at least once or twice a week to make sure everything’s running smoothly. (We’re talking to you, Free Spirits!)

If you find a problem, contact the bank and company immediately. The faster you report a disputed charge, the higher the chance you’ll get your money back.

And keep records of all your communication with them so you can put a stop to any nonsense and get the problem resolved.


Automatic payments cut down on the chance of late fees, but they can increase your chance of other fees if you’re not careful.

Some companies and banks charge payment processing fees. That’s dumb! You should never have to pay more money to pay a bill, so find a free payment method and stick with that.

You’ll also run into fees if you don’t have enough money in your account. Depending on the situation, the payment may “bounce,” or get rejected. Then you’ll owe the company a penalty fee, plus the original amount.

Or you may end up with a fee from your bank (because there’s nothing they love better than robbing customers with outrageous banking fees).

For example, if your $175 utility bill is due and you’ve only got $150 in your account, the bank will most likely cover that last $25 for you. Then, they’ll make you pay it back and charge you a $35 overdraft fee. So that $175 bill ends up costing $210. That’s sick!

Of course, traditional banks make money by preying on customers through high interest rates and fees—they made $11 billion on overdraft fees in 2019.2 (And that’s just America’s biggest banks. We’re not even counting all the little local and regional ones.) They’re just hoping you’ll mess up your automated payments and fall into the overdraft trap so they can profit from your pain.

The good news is, you can easily avoid this if you pay attention to your account and make sure you’ve got enough money for upcoming payments.

Automatic Bill Payment Tips

The precautions we just talked about will go a long way toward making online bill pay a positive part of your financial plan. And there are a few more ways you can maximize the benefits and make the most of automatic payments.

Choose the Right Bills

Automatic payments are great for most bills—in fact, some companies even give discounts for enrolling in online auto pay. You can automate gift giving if there’s a charity or group you support on a regular basis. And it’s safe for paying most debts, like student loans.

But you should never use automatic bill payment if you’re in a dispute with a collections agency over a debt you’re trying to settle.

We call that an adversarial relationship. You don’t want someone you’re in a fight with to have access to your checking account, debit or credit card info. If they do, scummy collections agents will raid your account and clean it out.

The best thing to do in this case is keep making manual payments using money orders so you can protect the rest of your money while you clear up your debt.

Make a Budget

A lot of you groaned at the word budget, especially if you’re a Free Spirit. But this is a basic fact: Automatic bill payments work best when you make a budget.

If you’re prancing through wildflowers in the Land of Uncontrolled Spending, those automatic withdrawals are going to bite you in the butt. Because once you spend too much, you’re out of money and you owe the company a fee for a payment that didn’t clear.

Or worse, you’ll owe the bank an overdraft fee. The bank is basically like a wicked witch that lives in the woods and eats children. They’ll lead you even deeper into the Forest of Fees until you’re totally broke.

They’re not going to take care of you. But if you make a budget, you can take care of yourself. You’ll have enough money in your account to handle those automatic payments.

And you’ll start enjoying the freedom that comes with taking control of your money. When you give every dollar a job to do, you’ll be amazed at just what gets done.

Budgeting is easier than ever with EveryDollar. This app helps you tell your money where to go, so you can get out of debt and gain confidence in your financial future. And it only takes 10 minutes to get started!

Stay Motivated

With online bill pay, it’s tempting to “set it and forget it.” You don’t feel the pain of making the purchase, so it’s harder to feel connected to your money. And when you’re not connected to your money, it’s easy for even the nerdiest of Nerds to lose motivation for sticking to a budget.

But if you want to truly win with your money (and stick to your budget), you need to monitor what’s coming out of your account each month. Especially if you’re trying to pay off debts.

We recommend checking your account regularly to make sure you’re on track. (EveryDollar makes this super easy, since you can link the app to your bank account to automatically track charges.)

Another hack you can use: Automate your minimum debt payments and make any extra payments manually. That way, you can still see your progress and feel connected to the spend. It’s the best of both worlds for Free Spirits and Nerds!

Don’t Make Automatic Payments With Credit Cards

When you pay a bill with a credit card, you’re not actually paying anything. You’re just moving the debt to a different spot. A really crappy spot with 25% interest.

So “paying” bills with a card only takes you deeper into debt—you still owe the original amount, plus the interest.

Let us say this loud and clear: Credit cards are not a good way to pay bills. They’re a debt product that makes banks money by sucking the life out of your wallet. Find a bank that wants to see you win with money.

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Ramsey Solutions

About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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