Pros and Cons of Using Direct Debit and Automatic Payment

Direct debits and automatic payments are services which have long been recognized as simple and fast ways to make payments. If you have a bank checking or savings account, you can set up an arrangement that authorizes payments to be deducted to pay your bills such as rent, loan payments, insurance, utilities and other bills. The payments will be deducted automatically on your account every month, on the day you have specified on your arrangement.

To compare, the direct debit and automatic payment have different approaches when it comes to payments. In direct debit, the amount will be taken from your authorized bank automatically whereas, in automatic payment, it will be controlled by you. Before you can go live with these services, here are their following advantages and disadvantages:

ADVANTAGES:

1. Saves time

Since time is limited in a day, having a direct debit or automatic payment as our mode of payment is more convenient. It definitely reduces your workload. More time is saved in writing checks, stuffing envelops and running around to mail it.

2. Always on time

There will be no worries about late payments. You can avoid hassles, disconnection notices, and late fees and penalties.

3. Saves money

Not only do you avoid the postage necessary to mail the payment, you avoid the possibility of late payment fees. Even if you put your payment in the mail 5 days before the due date, the mail can sometimes get delayed or lost, and you have to pay very stiff penalties.

4. Improves credit

Building a history of on-time payments improves your credit. It will reflect that you are a good payer and a good consumer. This builds a reputation that you are a trustworthy and responsible individual.

5. Provides more security

It is more secured since your payments are made electronically. You can rest assured that your bills are paid directly, no more no less. A proof of payment appears on your bank statement and on your next billing statement.

DISADVANTAGES:

1. You need to maintain enough money in your bank accounts.