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 don't. (Score:5, Insightful)
Re:I use Paytrust (Score:3, Insightful)
In New Zealand (Score:1, Insightful)
An Automatic Payment is something where the money is pushed out of your account at your end
Direct Debit is where a company has access to your account to withdraw
Yes, companies often 'forget' to discontinue the Direct Debit when you cancel services with them. People who use this method probably also fall for Hire Purchase and Lease to Own deals too
One-Time Payment (Score:4, Insightful)
Re:I pay online (Score:5, Insightful)
I don't (Score:4, Insightful)
I pay my bills online every month. That way I know exactly what I am paying. It's not that hard. The automatic payment thing is scary to me, because it takes control out of my hands. The only bill I pay automatically is my gym membership, because they wouldn't have it any other way. But at least that bill is the same every month.
I'd hate to pay my power bill automatically because it would have been a total surprise to me last month when it jumped from $50 to $160.
What kind of payment automation to use? (Score:4, Insightful)
None, for several reasons.
1) Billing errors occur. Don't allow them to take your money until you've verified the bill is correct. Otherwise, even if they correct the bill, you will never, ever get a refund.
2) Balance errors occur. Most banks will slap you for a $30-$40 NSF fee if someone sends an ACH debit transaction that's in excess of your available funds, whether or not they actually pay the ACH. Further, many banks play games about how fast they credit ACH deposits (like your direct deposited paycheck), or regular deposits (like your paper paycheck), in an effort to increase the likelihood you'll have an overdraft. What's more, when you swipe your debit card at a merchant, they can place a hold on your funds even if the final charge isn't anywhere close to the actual transaction amount. (Example: Buy $20 in gas at your local pump and find they "authorized" your card for $75. The bank holds the $75 for anywhere from 3 to 30 days. If you try to spend any of the $55 difference, they slap you with an overdraft fee because the funds were not "available," even though they're still "yours.")
3) Emergencies occur. If I need to take my kid to the ER and shell a large amount of money so that he'll have an eye tomorrow, I shouldn't have to call the electric company to get them to stop the payment so I can do it.
Most banks allow online bill payment, and many don't even charge a fee to use it. The good ones will even present my remembered vendors in a list, and allow me to simply enter the amount I want to pay, the date I want to pay, and click "send." Automatic payment benefits only the vendors and the banks, never the customer. I do not exist for a company's benefit; they exist for mine. Just because they prefer to swipe my account on the due date doesn't mean it's to my benefit to let them. They can take a paper check (or a CheckFree deposit) when I'm damned well good and ready to send it to them, and not a day before.
Own bank's bill-pay system (Score:5, Insightful)
I use my own bank's bill-pay system, because they take all responsibility. If it says a check is to be to my electric company by the 15th and it isn't, THE BANK calls the electric company and explains the situation, then deposits any late fees into my account.
In the past using my billers' systems has been a nightmare or two.
One double-billed me one month and would not refund the second billing because my next bill would be due by the time the return would process. The bank could not reverse the charge because the payment came in with my authorization.
I've had more than one bill me too early.
And recently my cell phone bill was over $500 in error two months in a row because of a missing billing code on my data plan. All sorts of fecal matter would have hit the fan if those payments had been automatically debited.
And other incidents of which I cannot recall the details.
Unless the biller is willing to take responsibility for errors on its end and IMMEDIATELY return money taken in error, as well as cover whatever fees or damages are incurred due to the error, payments come via bank bill-pay only. And if that is not acceptable, then the account gets closed and I move on.
Re:Automated payments destroy jobs (Score:5, Insightful)
Re:Well (Score:4, Insightful)
It's not a universal constant that reversing charges has to be difficult, and nor is it that you should incur overdraft fees that aren't reimbursed when a charge is reversed. It's down to the banks to handle the practical implementation in a way that consumers would agree with, but that does nothing to change the evidence suggesting that the concept itself, when properly implemented, is very successful.
Re:I don't. (Score:4, Insightful)
Which is why I set up payment the same day I get the bill. Basically, I get online notification (usually email) that a bill is due. I log into my bank and set up the payment with the payment happening on the due date. Then forget about it.
With email notification, I don't delete the email until I set up the payment.
Re:Verizon (Score:5, Insightful)
Nobody has access to any of my accounts but myself. Not even my wife.
I hope you've got things sorted out well for emergencies. Somebody has power of attorney, yes?
Re:Shows why Slashdot is too Americocentric (Score:3, Insightful)
Oh we know but this is a primarily American site. That's like going to America and then complaining that we're too American. Your point would (is, really) valid on sites like theregister.co.uk but not here. Not all sites on the internet are going to cater to your whims, you can create your own or find a more local site if you want. That is the beauty of the web.
The fact is, US banking is backward (Score:5, Insightful)
In the US it has been made very easy to set up a bank -with the result that many people, some with fraudulent intentions, do just that. (At the other end of the scale I know of a small community of professional people that set up its own bank just because they didn't trust the big ones, and it was very successful. I am not suggesting that Americans are less honest than Europeans, that is far from the truth.) In Europe the banking system has deep roots in the Jewish community becaue Jews were discriminated against - they could not own land but were allowed to charge interest - and this tension has created what is, on the whole, a very successful and honest banking system. (In fact in the UK banks were also started by nonconformists like Quakers for much the same reason - Barclays being an example.)
The result is that until the madness of the last ten years our banking system was very trustworthy and we were prepared to believe in direct debit systems - which on the whole work very well. Meanwhile in the US banks were still settling interbank transfers with bits of paper, and this is still an issue today - in Chicago we had to set up an account with a subsidiary of the (British) NatWest just to avoid ludicrous delays and overcharging for simple transactions. This is ultimately because in the UK many bankers knew they were less than honest, and so were not inclined to trust other banks. The present credit crisis is because, after years of unregulated credit and junk assets, banks have discovered once again that they cannot trust one another. Paypal is an example of a system that was set up to deal with what is really a US problem, not a general problem.
The answer to direct debits is to make the system as robust as European systems - which make the person asking for the money extremely liable if they make a mistake. But this is unlikely to happen, because US law favours corporations over individuals. And, given Obama's choice of running mate and his connections, voting either way in November won't have any effect.
Re:I don't. (Score:3, Insightful)
Cost is the real issue. Mailing letters is an expense and every now and then mail gets lost or stolen. With an electronic transfer there may be no cost at all and you save time every month.
For those that are really worried it is easy enough to set up two bank accounts such that one transfers just enough money from one account to the other to pay for the monthly transfers. That way the account with the big money is not exposed to anyone but yourself. And you can do your bill paying with savings accounts rather than checking accounts. Check books are a path to disaster as in my neighbor having a check torn out from the back of her book while her car was being cleaned at the car wash.
Re:Likewise... (Score:4, Insightful)
/agree
Its a lot easier to dispute a bill when you haven't paid it. Once they have the money, its pretty hard to get it back.
Re:The fact is, US banking is backward (Score:5, Insightful)
And the reasons for the European situation are not because EU banks behave better - it's because of heavy-handed intervention from the governments to protect consumers.
All these benefits of EU Direct Debit system(s) that make it good for the customer (instantly reverse payments weeks after they have been debited, authorisation requirements, fee and float limits) are not due to goodwill, but due to requirements set by initiatives such as EU Payment Service Directive and SEPA. The situation would me much more in favor of the billing companies' and bank fee-income (like in USA) if it were driven purely by free market.
Re:What kind of payment automation to use? (Score:3, Insightful)
3) Emergencies occur. If I need to take my kid to the ER and shell a large amount of money so that he'll have an eye tomorrow, I shouldn't have to call the electric company to get them to stop the payment so I can do it.
What kind of a fucked up country do you live in?
A myth about "third parties" (Score:3, Insightful)
There seems to be a common assumption, even here on Slashdot, that your money is somehow safer if you don't entrust it to a third party (such as a bill payment service). A few months ago, I was talking about check fraud with someone who doesn't do any online banking at all. I asked him if he writes checks, and he said "Only to the electric company!"
I don't know about you guys, but I haven't audited my electric company's processes lately. Anybody here know the name of the person at NStar/ConEd/etc that opens the mail? Anybody sure if the mail is even opened by an employee, or if it's contracted out to a vendor of theirs? Do they even do the data entry locally, or do they throw it in a scanner and have the data entry done offshore, like radiology labs do?
I don't see any reason to think that writing a physical check to the electric company is any less secure than doing it online, where I have a reasonable assumption that at least it's not going to go through human hands for payment processing. (Unless, of course, that online payment becomes a laser check, which then is subject to all the same vulnerabilities.)
Summary: I think you generally have no way of knowing if your payment method is secure or not. I just assume it probably is, and that I have legal recourse if I'm wrong.
Re:One-Time Payment (Score:1, Insightful)
Whoa, you don't have somebody close enough that would take care of these things for you?
Re:I pay online (Score:4, Insightful)
I've seen seven non-Windows machines in four years in this country. They were all owned by foreigners. Four belonged to me.
Are there any large, English-language websites in Korea? I'd like to visit them in Firefox and then write to the webmasters with the problems I encounter. Having the web OS-neutral will be the first step in solving the problems that you describe. My own country was not too different until about two years ago, and I've been actively contacting webmasters for about five years demanding OS- and Browser-neutral websites.
I encourage you to write to them as well. If they don't hear from us, they won't know that there is a problem.
Re:More Paytrust info - LOTS OF DETAILS (Score:4, Insightful)
I started with PayMyBills. I abandoned them and switched to Paytrust after PayMyBills got behind on processing incoming bills and were making late payments.
Yep. I used paymybills.com too, and loved them- right up until my car insurance got canceled because they didn't process my bills for two months. It was a really great situation, because, not being bills, they also didn't 'process' the cancellation warnings and notices that they surely received. I really like the idea of 'outsourcing' bill paying but I don't trust anyone to manage it properly except myself.
Re:D'uh (Score:5, Insightful)