2

I have a personal account with BOA and I'm curious how I should set up my automatic payments (to utilities, landlord and friends). Should I

A) go directly to the companies (that have to pay) and tell them to draft from my account
B) tell BOA to send them a check every month via Bill Pay
C) tell BOA to direct deposit to their account (not always possible)

Are there tradeoffs between these or does it not matter?

8

A) go directly to the companies (that have to pay) and tell them to draft from my account

  • Make sure you know how to stop this feature, so that they don't keep pulling from your bank account. Some people use an automatic billing to a bank account or credit card to pay their gym membership, then forget to turn it off even after they stop going.
  • Best for bills that don't change very often, that way there are no surprises.
  • As long as you have money in the account, it will go through.

B) tell BOA to send them a check every month via Bill Pay

  • Bills that can be paid electronically work the best, because the money gets to the company in a day or two, instead of a week.
  • they can handle almost any company or individual by sending a check by mail. But it takes longer.
  • The money comes out when the bank sends the check, not when the company cashes the check.
  • Have to get proof of payment on the company website, or when the company sends a receipt. there will be no scanned check on the banking website.

C) tell BOA to direct deposit to their account (not always possible)

  • I have used this only for mortgage payments to the same bank.

There is 4th option. If the company can handle an automatic draft from your bank, they might be able to automatically charge a credit card. That means only one payment from the bank each month to pay the credit card bill. This takes dedication to not skip a payment and owe a lot of interest. You can also earn cash back, or miles for these transactions.

A utility bill can sometimes be put on a level payment plan. They estimate your bills for the year based on past usage. They charge the same amount for 6 or 12 months, then they adjust to reflect actual usage and repeat the cycle.

  • Re: your first point to B), do you mean to say that there are two ways that B) can be done: electronic check (a day or two) vs. physical check (a week)? If so, what is the difference between C) and electronic check? – Wuschelbeutel Kartoffelhuhn Jul 24 '13 at 6:37
  • 2
    At my credit Union if I want to use bill payment I provide the company name, address, phone number, and my account number or invoice number. If it is a large company the payment is sent electronically, if it is a small company or person it is sent via mail. I don't decide which way the money is sent, it happens behind the scenes. I also don't know the company bank name or bank account number. Under Option C I would have to know the bank routing number and account number. – mhoran_psprep Jul 24 '13 at 11:09
  • 1
    What @mhoran_psprep says about the bank/FCU controlling whether the bill pay is electronic or paper check comports with my experience. You can typically tell the difference by the gap between the "send on" and "deliver by" dates on the bank's bill payment page for the payee. For my credit union, electronic is 3 business days; for paper it's 5. – Rick Goldstein Aug 30 '13 at 16:58
1

Be aware of the following issues amongst these:

  1. I'm presuming this is sending the companies a voided cheque that allows them to make a pre-authorized debit on your account. The key point here is that if the amount should fluctuate like some utilities may, then the amount coming out will vary and you have to maintain enough of a balance so that you don't bounce the payment. If you ever run your account to a low balance, this could be dangerous if you mis-account for things.

  2. This gives you some control in that you pay when you want and thus can ensure the funds are in the account. I'm presuming this is the same as doing a bill pay through PC banking which is a bit different from physical checks. This would be my preference as I like knowing things will work though I do a pre-authorized debit for a few things like monthly bank fees and insurance.

  3. I'm not sure I can easily imagine this construct enough to see where it goes.

Some bills like rent may be best done through post-dated checks since the amount isn't likely to fluctuate and thus can make sense. However, most banks will charge for checks and thus you may have to order checks at a point.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.