In my opinion, automatic debit (where the merchant takes money directly from your checking account) should be avoided. In many ways, agreeing to automatic debit is like giving the merchant a blank check. If they make a mistake, you are likely to pay a price. Despite this warning, we allow two accounts to direct debit our checking account:
- Student Loan – one of my loans offers a discounted interest rate for allowing the direct debit. Although I do not like it, it was a good deal and so far so good.
- Insurance – before I knew better, I allowed State Farm to direct debit my account. While they have not made a mistake yet, we are going to cancel monthly bill pay. As a plus, we save the monthly service fee.
We do, however, have our cable, phone, oil heat and auto insurance charges taken directly out of our cash back credit card. Why?
- Cash back from Amex Blue.
- One Bill – Instead of paying multiple bills, I take care of all of them by paying my American Express bill.
- Risk – in the event the merchant makes an error, our credit limit is large enough to prevent any over-limit fees. Furthermore, we should have enough savings available to take care of any mistakes.
Online Bill Pay: Using ING Direct's online bill payment system, we use a mix of automatic and manual payments to take care of our bills. Makes life easier.
- Fixed Payments – since our mortgage and car payment are fixed, our payments go out automatically. By automating, we do not have to remember to send anything out.
- Variable Payments – For the most part, they are our two credit card payments (the Amex Blue and a Gas Discount Card).