Automated Bill Payment Options

When you look at your bank statement, you can see the names of businesses you’ve paid by reading the withdrawals / debits section. At times, you may see the letters ACH. The abbreviation stands for Automated Clearing House. Do you know what that means? If you don’t, you’re not alone.

ACH payments are transactions that are automatically deducted from your bank account. Why would you let a business automatically deduct money from your account? Maybe you wanted to prevent late payments on your mortgage or you didn’t want to forget a gym membership payment. In order to set up ACH automated payments, you give your bank’s routing number and account number to the business you want to pay. The transactions will automatically deduct from your account, which means you don’t have to worry about late fees, poor credit ratings, or cancelled memberships.

It sounds good, but you need to be careful about overcharges. ACH agreements are open-ended. What that means to you is that the payments can continue long after your contract ends (and even after you close your account).  As of right now, there doesn’t seem to be any protections out there for the consumer when overcharges occur. This is not a good thing for your finances.  If you assume the payments have stopped, and the payment occurs anyway, that could cause bounced checks and all the fees associated with overdrafts.

Worse yet, if you want your money back, you’ll be on your own.  The bank won’t help, because you provided the bank account numbers that allowed the business to deduct money in the first place.

If you want the convenience of automated bill payment, but don’t want the risk, my advice is to set up the transaction through your bank instead of through the business you want to pay. Many banks will let you set up reoccurring payments that can be cancelled at any time – you are in control.  If you are not comfortable with online bill payments, the other option is to have the automatic payments set up through your credit card.  Credit cards do have consumer protection and you would have the assistance of the credit card issuer to deal with overcharges.