Money Kings Do Not "Do" Automatic Withdrawals.
For your consideration: Money Kings Do Not "Do" Automatic Withdrawals.
One of our crew was on a very popular and very large public water management company's lovely phone system today. He wound up hanging up on the company in favor of repeating the call at a later time with all of us present.
The reason our guy did this was to give all of us an opportunity to listen to the introductory message from the aforementioned uber-water company. Once we all got in front of the phone and dialed the number we, again, were appalled at what happened.
The company, hereinafter referred to as "Son-of-a", could have welcomed us with a report on the weather, or maybe an automatic fortune cookie-ish thought for the day. Something like "Bad things will happen soon" might have been an appropriate message in this case.
What we heard was an "helpful tip" from Son-of-a letting us know that we can set up a dividend reinvestment program for buying their company's stock very easily over the phone. Son-of-a also let us know that we could easily buy their company's stock most efficiently by automatically deducting funds from our bank account each month.
Freeze!! Right there . . .
This is where The Money Kings must retort. Let's get something straight here. Money Kings don't do automatic fund releases to ANYONE under any circumstances. We fully advocate automatic deposits from anyone into our accounts, but allowing ANYONE to automatically deduct funds from our banks? Forget it.
Here are just a few reasons why automatic deductions for bills, buying Son-of-a's stock or any other third party's interest is a bad idea:
- You'll forget what amounts you allowed your vendor to remove from your accounts. We know you don't think you will, but trust The Money Kings, you will.
- If your vendor takes too much money from your account one month, think of just how long it will take you in time and effort to call and call and call and wait on hold and wait on hold and wait on hold to get your own money back.
- You shouldn't drink the Kool-Aid from the vendor telling you that you're wasting time keeping track of your bills and writing checks, or manually authorizing online payments yourself. The Money Kings ask, just what is worth your time and attention more than your money? Not much.
- Once you give your account information to a vendor, you're never assured that they won't use your information or sell it to someone else no matter what their privacy statement might read. Generally, the more control you keep over your cash the better you are to RULE it yourself!
Good luck out there.
Keywords: tips, money, rip, off, auto, deduction, cash, deposit, bank, account
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I absolutely agree with this
I absolutely agree with this tip! Let me tell you my story...
I owned an apartment complex which I allowed the utility companies to automatically draft the payments from my account. One month they had a billing error (due to a faulty meter reading) and ending up drafting a gas bill in excess of $1200! Normally my gas bills would about $200 to $300 per month, and a little higher in the winter.
Now, my bank account was out the cash, and I needed that money. I tried calling, and it took several calls, a few escalations, etc to finally get someone in the magical "billing" department to fix my bill. I don't know why, these billing department people are like the wizard of oz, you're never allowed to talk to them...Anyways, after wasting a few hours spread over the course of a week talking to these people, my account was given a credit of roughly $900. I wasn't going to get a check, due to the way their "system" worked. So, while I eventually used up my credit, I essentially had to prepay 5 to 6 months of my gas bill, and this made my cashflow situation a little tight.
Never again will I do automatic withdrawals. I like to now be able to review the bill for errors before I release payment. The only automatic withdrawals/payments I do are directly to my credit card for those vendors that require it. At least I have a little more power disputing the transaction with a credit card.
I agree to an extent with
I agree to an extent with this, but only in situations like the previous comment describes, those where the rate of a bill is variable.
With something like a utility bill, which is derived from the observations of measurements by a human (thus establishing the weak link in the chain), there's a big chance of there being an error.
Something like my auto and renter's insurance, on the other hand, not the same situation at all. It's a fixed amount and should it ever change, I get a letter a month in advance from my insurer telling me so. I have both of those autobilled every month, and I get an additional discount for doing so. To make the situation even more painless, I have my online high yield savings account automatically send the money to my checking account a few days ahead of the draft from my insurer (I put half of the amount of each of my bills into savings every time I'm paid by my employer to create a stable cash flow from paycheck to paycheck... did a post on it once, maybe I'll revisit that one).
Then there's things like student loans. Usually, you get a rate reduction for 36 months of perfect, on-time payments (Sallie Mae does this, anyway, not sure about others). For some people, the gamble of maybe missing a payment versus taking on some of the risks you've describe isn't worth avoiding those potential pitfalls.
If you get a rate reduction
If you get a rate reduction for using an auto-pay service then I agree with using it. For example, my home equity loan repayment is the only thing that I allow to automatically deduct from my account because I get a .25% interest rate reduction for that.
However, for other items whose payment I know won't change, such as my mortgage or car payments, I still don't allow them to automatically withdraw from my account. As a rule I dont like giving any company the privilege of drafting money from my account...I dont know, maybe its part a control thing, and maybe the other part of me is paranoid that their computer system will accidentally draft too much one day. Nowadays banks are always buying each other up and merging computer systems. I dont trust that these mergers will get all the details right, and one day I dont want to find my bank account being drafted 2 mortgage payments at once, etc.
Agree
I agree big time. Not only are you giving up control but also allowing yourself to become financially lazy. When you are forced to write a check for each bill each month you have to look at the statements. When you are looking at these statements is when you find those little slip-ups made by minimum wage worker at the public utility district. Great post.
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