Pitfalls of Automated Bill Payment 416
theodp writes "A few months ago, the NY Times' Ron Lieber extolled the virtues of allowing utilities, phone, and credit card companies to pull whatever you owe from your bank account. Big mistake. Lieber's readers fired back, telling him he was out of his mind for suggesting that they give billers unfettered access to their credit cards and bank accounts. Now Lieber goes through five of the glitches that can occur with any of the various methods of setting up automatic payments: 'You can give each biller permission to pull the full amount from your bank account. You can use the online bill system at your bank to push payments out automatically each month. Or you can charge every bill to your credit card and give only that card company permission to pull money from your bank account when the credit card bill is due. Each of these methods has its potential shortcomings ...'" What kind of payment automation do you use, and why?
I use Paytrust (Score:5, Informative)
http://www.paytrust.com/ [paytrust.com]
Most of my bills are transmitted electronically. The rest are mailed to Paytrust's P.O. box, and they post the scanned PDF for my review.
I set the payment rules via their website: pay full amount, pay full amount up to [limit], pay specified amount. Or I can just wait for the notification in my email and pay it myself with a few bill clicks.
Re:I don't. (Score:2, Informative)
Because you'll forget and get stung with interest and/or penalty fees?
Direct debit (Score:5, Informative)
Over here (the netherlands) lots of people use direct debit. It's safe and convenient and it doesn't give anyone unlimited access to anything. If you give permission for a regular direct debit to a company you can at any time cancel this with your bank, you can also undo an automatic withdrawal (within a timeframe of 2 weeks after the withdrawal iirc), no questions asked.
Also, people rarely use creditcards here, everyone uses direct debit cards, which are secured with a PIN code. Cheques are not used any more. If you need to transfer some money to someone you usually transfer it directly from your account to theirs.
Common practice (Score:5, Informative)
This has been common practice in Germany for as long as I remember (or live). If you do notice an illegitimate transfer, you can tell the bank to undo it, at which point it is up to the company again to bug you about the money. I think all in all, it's less hassle to just check whether all deductions are legit than to manually transfer money to your billers.
Re:I don't. (Score:5, Informative)
Because it's cheaper?
Over here in the UK some companies give you a discount on your account if you pay by Direct Debit (basically an instruction to your bank to give the company whatever they ask for each month). I say 'discount', of course it's really an extra fee for doing the work yourself. If you pay online with a card you pay extra. I think for my phone company it's an extra GBP4 per quarter.
Companies over here love Direct Debits. Every bill comes with a 'why not pay by Direct Debit?' leaflet. Sadly there's no tick box for "I really don't trust you". Stories of epic fails with DDs are legion - an extra zero on the bill makes the person go overdrawn, they get a bad credit record, they lose their house, they kill all their family and so on. I exaggerate. Slightly.
Sometimes I feel I'm the only one not paying by DD, but that's what they want me to feel...
Verizon (Score:5, Informative)
I had to CLOSE a bank account to keep Verizon out of it. They first drew more then I owed them from it, then after I told them I wanted paper bills that I would pay myself(they also tried to charge me for the bills), and to not auto-pay anymore, they promptly attempted to draw the same amount, found they had no access to it and charged me an insufficient funds charge. I believe that was entirely intentional.
That was enough for me. Nobody has access to any of my accounts but myself. Not even my wife. That way when I have a charge to my account, I can ask to see my signature on something specifically authorizing it. No signature? Not my problem.
The hassle of dealing with idiots like that FAR outweighs the convenience of auto-pay.
Likewise... (Score:5, Informative)
I live in Canada and pay all of my bills through my bank's web site. As much as people like to rail about the lack of competition in Canada due to the fact that there are only five chartered banks for the entire country (other than credit unions, but they are provincially regulated), all five of the chartered banks offer sophisticated on-line banking (some more sophisticated than others). Hell, I even paid my property tax to the City of Calgary on-line. There is no futzing around with the biller in question and arranging electronic payments, you simply add them to your payee list on your bank's website.
Now, I could set up automatic bill payments, but I had a bad experience with the Royal Bank and a student loan; that isn't going to happen again.
Well (Score:3, Informative)
I'm using automated payment [betalingsservice.dk].
To be honest, I don't see what the fuss is about. If I see a charge I don't agree with, I have it reversed, and confront the billing party, though that's yet to happen. I don't see how anything short of a good portion of cynicism could keep people from using this. I haven't done anything to pay any utility, telco or ISP bill for over a year. Even my rent is handled automatically. Saves me a lot of trouble.
It's done everywhere else, so why not in the US? (Score:2, Informative)
Since I moved out of the US, I have paid all my bills online. Outdated methods of paying bills with paper checks do not exist here, like in the US. I've been paying bills online for years now and have never even once had a single issue. And I've never heard of anyone having problems here either, outside of single time when a fake bank website was set up and caught a few people. Anyone with even a remote knowledge of the web would have known it was a fake site though and it was shut down pretty quickly.
I don't get this whole anti-online payment mentality in the US. As long as your bank has the proper security in place, there is no issue. I would not hesitate to say that more fraud occurs giving CC numbers over the phone or sending payments through the mail.
Re:I don't. (Score:3, Informative)
Because it's cheaper?
Over here in the UK some companies give you a discount on your account if you pay by Direct Debit (basically an instruction to your bank to give the company whatever they ask for each month). I say 'discount', of course it's really an extra fee for doing the work yourself. If you pay online with a card you pay extra. I think for my phone company it's an extra GBP4 per quarter.
Companies over here love Direct Debits. Every bill comes with a 'why not pay by Direct Debit?' leaflet. Sadly there's no tick box for "I really don't trust you". Stories of epic fails with DDs are legion - an extra zero on the bill makes the person go overdrawn, they get a bad credit record, they lose their house, they kill all their family and so on. I exaggerate. Slightly.
Sometimes I feel I'm the only one not paying by DD, but that's what they want me to feel...
I think there should be a middle road, so that the bills get automatically posted to your bank account, and automatically paid upto X amount with an confirmation email sent automatically to your inbox.
Those exceeding the amount you could manually go and approve, or if you wish, manually approve every single one. Easier and safer.
Here in Finland, Direct Debit is rarely used infact, and nothing really happens if you cannot afford the invoice, in the past they tried 4 times on 1 day intervals, each time accrued 2.8euros extra charges.
Interesting update... (Score:4, Informative)
My favorite part, if you've RTFA to the very end, is this:
UPDATE In last weeks column on socially responsible investing, I mentioned an exchange-traded fund called the HealthShares Emerging Cancer Fund. What I failed to notice, because the company hadnt bothered informing potential investors on the funds own home page, was that the day before my deadline the company announced it was shutting down the fund in September.
Now here is someone you should definitely listen to.
Re:I don't. (Score:4, Informative)
Indeed; and there's a specific guarantee with Direct Debit, a phone call to the bank will get the money back immediately and it's up to the bank to chase the creditor not you. Creditors must warn you in advance if the payment amount changes, in writing, and you can cancel it at any time. Also creditors are vetted (a little) before they get the facility to allow you to setup direct debits.
The only problem I've had is with electronic DD where you don't need a signature to set it up. I've had a couple of direct debits setup for mobile phones because a cheque book was stolen a few years back; however my bank notifies me in writing every time a new direct debit or standing order is set up so I can check it (ok it's not a useful letter, they send me the reference number for the DD and the reference number for the organisation that set it up; I have to go on-line and review them where I can actually see the name of the organisation, but it's better than nothing.)
How is it done abroad? (Score:3, Informative)
It might be of some help to know how is it handled in other countries...
Where I live (Spain), direct debit has been the rule since long ago: almost everybody does it this way. Utilities (electricity, telephony, gas, mobile phone), insurance, mortgage, all charge your bank account monthly or bimonthly. It is convenient (especially for them) and problems are not too common, although they exist. But then you can dispute the charges or go to the consumer protection office.
Banks try to push you to do it this way: most of them only let you pay your bills only one hour per day (for example, from 10 am to 11 am only).
My personal take on all this: I like it this way. As I said before, problems are rare; it is far more usual to know someone that has had his credit card number stolen than to know a case of having trouble with direct debit. And to have something less to care about is worth it. Anyway, most of the time the bill gets to you by mail two or three weeks before the charge is made, so you can check it and have some time to fix the problems (good luck with that though).
Overdrafts are allowed, but they are easy to avoid. Actually, banks like so much this system that they will equate having this kind of automated bill payment with being a regular, good customer: in most "fidelization" promotions, they ask you to have two or three bills paid through them.
Re:Well (Score:3, Informative)
It's not as easy here in the US to have a charge reversed, and if that charge causes you an overdraft fee, you can be really left out to dry in the meantime.
More Paytrust info - LOTS OF DETAILS (Score:5, Informative)
I was an early adopter with Paytust (back when they were PayMybills.com). They were bought out by Intuit. I'm still with them today. Here's why:
BORING: Yes, you can do the simple bill payments that you can do with many bank accounts now. You can send a check to a name or an address for a certain amount, perhaps against a specific account number. They'll put everything together and mail out the payment for you.
EXCITING: What makes this service shine is bill RECEIVING. You got bills that come to your house? You change your billing address. You give them a special PO BOX # that is provided with your account. Paytrust will scan the bill in as PDF format. They'll pre-populate the bill's data into your account, matching it with one of your known billers, and doing the data entry for the minimum amount due, the total amount due, and the due date.
In my case, I still micromanage. I get an email from them saying that some new bills came in (and provides the basic details of the bill that I just mentioned). So, most of the heavy lifting is done for you so that when it comes time to pay the bill, it is just 'click a checkbox', 'click a button', and 'click a button to confirm'.
You can set up autopayment rules (which I haven't done) to auto-pay a bill if it is under a certain amount, or to pay off the full balance, or pay against the minimum due, or whatever. I know that they've got some flexibility there.
They're got some added protection for detecting duplicate bills (more than 1 bill in a billing cycle), and also, more importantly, the 'missing bill', to let you know that normally you receive a monthly bill from a company, but nothing ever came.
ORGANIZING: If you read between the lines to see the net effect of all of this, here it is. Basically, I log onto their website. The main screen tells me the bills that I have yet to pay. The bills that I have paid will drop of of that screen. So I instantly know, at any given time, what has or hasn't been paid. Which is so useful to me, I haven't had a late payment on anything since I adopted their service. That has contributed to my credit score reaching a very nice level (and my avoiding late penalties, and punitive APR increases).
RESEARCH/HISTORY: A scan (again, PDF) is kept online for a year (after which, they offer archival CDROMS. So you can go back and, say, figure out when a charge was put on, or when you interest rate changed, or how much electricity you used a year ago. Totally worth its weight in gold in doing the kind of research that only the most organized freak could do before.
You've also got a good summary screen of every payment you've ever made through the system, so you can find out, say, what were the last 10 payments I made to Chase?
Small unexpected but appreciated service: if my credit card company sends me a credit card, or I get a really weird non-bill letter (that isn't spam), they'll forward it to my real address.
So, I hope I don't come across as a shill for these guys, but I'm absolutely a great fan. Their service has really saved me so much time, money, and frustration over the years. One of the best kept secrets of the web, IMHO.
Re:Direct debit (Score:4, Informative)
Here in The Netherlands it's mainly the cable company UPC that gets in the news for continuing monthly withdrawals after cancellation of a contract but the banks sort these problems without cost for the individual.
Last month it was thirty years ago I got a credit card because I experienced the hard way it was a necessity for international travel. To get it (from American Express) my bank needed to mediate and I was the first person with one for this local branch.
Even then it was the normal thing to do to (fully) pay the credit card off every month by Direct Debit.
I have never had any interest payments due to a credit card company because of this system, after all, when needed, a bank loan is much cheaper than a CC overdraw.
In the present age even the credit card is not needed any more, virtually anywhere in the world I can use my bank's debit card to get cash as they are associated with Maestro.
Cheques are generally not used in The Netherlands as they are not guaranteed and you have to wait up to 14 days to get your money, it is only from the UK or the US that you sometimes see these expensive, worthless and outmoded things coming in, the IBAN system is much more efficient.
Different places, different practices? (Score:1, Informative)
In Norway, we basicly have two forms of electronic bill payments; "electronic payment" and "agreed payment".
The electronic one is simply a bill added to your "e-bank". It's added at the same time you would get the bill via snail mail, and the payment date is set to the deadline for the payment. There is also a tickbox called "accept". When this is accepted, the bill gets paid on the deadline date.
The agreed one is like the above, with the tickbox already ticked. You can review and stop the bill at any time before the deadline.
On the agreed payment plan you can ofcourse set a monthly upper limit for each company.
It is *not* like giving a company a straw into your bank account. I handle payments of electricity, phone, ISP, rent and insurance this way.
On a sidenote, the one time I paid too much (by my own mistake, this was before agreed payment) I got the surplus ammount subtracted from the bill the following month.
Re:It's done everywhere else, so why not in the US (Score:5, Informative)
If you use automated payment, if the system fucks up, you'll personally spend hours upon hours on the telephone with said company trying to get the insanity dealt with. "No, no that's not what our system says here sir, the amount we deducted from your account is US$45.97" "But you deducted US$495.70!" "No sir that is not what our system says". It will take days, if not weeks, to get things straightened out.
That's the problem with your system, right there. Here's how it works in the UK:
(Call utility company)
"You charged me £495.70"
"No, we charged you £45.97"
"Refund me £495.70 now, or I'll get my bank to take it back from you.
(In the unlikely event that they refuse, call bank)
"I've been overcharged on a direct debit. Can you refund it for me?"
"Certainly. What's your account number?"
It'll take ten minutes to deal with, maximum.
Yes, this has happened to me.
Trust (Score:2, Informative)
I guess it's all about trust. I too use Direct Debt (Belgium) for most of my important uttilities (water, electric, phone, gas)... But we have many different options. For example: most uttilitie companies just direct debt a fix amount you have agreeded with them when closing your contract (for example $ 120 a month).. every 6 months they send you an "update" with a calculation of your real usage and give you the money you payed too much back OR send you the bill for the remaining amount (can be direct debt too if you want).. this way, the suprises are kept at an absolute minimum.. For the few errors i have heared about, it always was corrected very soon and honest ( as in: putting your money back on the date they took it off so you don't loose your interests..
For less known companies which you doubt.. you can use electronic billing where you see the bill on your electronic banking, can quickly check the details and pay it with 1 click.. Then again.. i've never hearded horror stories about getting the money from different accounts if you don't have enough money on the original one.. if the funds are insufficient, the direct debt just bounces like a cheque and that's it.
Standing on both sides of the line ( my company also uses direct debt to get our money from the customer).. i can tell you it is a time saver for us AND , more important.. get's us the money in time.. if you want to pay manual, there is an extra fee attached to it simply because 90% of our B2B customers simply pay late.. not enough to ask for interessts but enough to be painfull for a startup.. (taking 35 days instead of 28).. we often really need our cash to pay our own bills.. and it turns into a spiral at the end.. our customers pay late so we have to pay late ...
What i wanted to add about The Netherlands ( since we do business there too).. They have an extra motivation to do things right.. I a company bills wrong a couple of times , their right to direct debt can be revoked by the bank until they sort out the problem.. now if you are a company in the Netherlands with a couple of thousand customers and you screw up a couple of times.. you'll be very sorry to notice that all of a sudden, you have to bill all these customers manually and try to get your money from them... believe me that this is a REAL motivator to check your process and your code 20 times before using it in production...
Re:Likewise... (Score:2, Informative)
likewise.
I can receive most bills within the account or still have them sent to my house. Payments are when I make them and for the amount I say.
Re:I pay online (Score:3, Informative)
No, the Korean websites aren't really in English. No one uses Google or Yahoo! here. They have their own search (Naver), e-mail (Hanmail), social networks (Don't remember the name), and even office suite (Hangul Office). If it weren't all based on a foreign OS, I'd actually kind of respect their "independence."
Re:What kind of payment automation to use? (Score:1, Informative)
Fixed that for you.
Re:More Paytrust info - LOTS OF DETAILS (Score:3, Informative)
Their page says they will cover things if their service is late. Did you take that up with them? Looking at the service (and several raves people give it here), I'd be curious how well they handle problems like that.
Re:More Paytrust info - LOTS OF DETAILS (Score:3, Informative)
I really like the idea of 'outsourcing' bill paying but I don't trust anyone to manage it properly except myself.
It's certainly not "fire and forget". I monitor bill payments with a calendar in Quicken, and reconcile my checking account automatically (online) a couple of times a week. So, I recognize a missing payment before it becomes a problem, and make a manual payment if necessary.
Since moving to Paytrust, the problems has always been the biller. At one point, a company actually cut off my service for non-payment, and it was Paytrust that provided the proof that the bill was paid via EFT.
Re:I pay online (Score:4, Informative)
That would be a cautionary note about impatience. That problem dates back to the period right before SSL was finalized when the South Korean government mandated an ActiveX approach to securing banking connections.
The official SSL spec came out only about 6 months or so later, but by that time there wasn't really much interest in fixing the error.
Fast forward to today, and it means that it's basically impossible for non-Windows computers to access those services.