checking account payments

Do You Really Want that Payment Taken from Your Checking Account?


20 July,2012

One of the ways to automate your finances and easily manage your expenses is to have some bills automatically deducted from your checking account. Automatic deductions are great, since you don’t have to worry about being present to make a payment, and you don’t need to write a check.

However, before you decide to have the money deducted from your checking account, you need to make sure that it’s in the best interest of your financial situation. Sometimes, it makes more sense to choose a different account for automatic payments.

Using Credit Cards Instead of Your Checking Account

Before you automatically give out your checking account information, take a step back and think about using your credit card instead. Having too many items coming out of your checking account at once can strain your cash flow. What if you have had an unexpected expense? The bills will keep coming, automatically, out of your checking account, while at the same time your account is drained a little bit.

Another issue has to do with timing. If you are paid every other Friday, but your bills come out of your account on the same day each month, the timing might become a little bit off. As a result, you could end up paying overdraft fees when there isn’t quite enough money in the account when it comes time to pay the bills. In the end, you want to make sure that you have enough money in your account that things run smoothly.

A credit card can help with that. Your automatic payments come from your credit card account, and that leaves your checking account free for other expenses. You pay off your credit account when you are actually paid, so you don’t have to worry about the problems related to certain timing issues. On top of that, you can earn rewards points, getting the most out of your credit card while helping to smooth your financial transactions. Using a credit card can help you earn cash back for paying for regular bills.

Some Payments Have to Come Out of Your Checking Account

Of course, you can’t use a credit card for all your expenses. In some cases, using a credit card isn’t an option. Mortgages, and many car loans, have to be paid out of your checking account. Most lenders don’t want you to make a payment on a debt you have with credit card debt. Even if you pay off the credit card each month, most lenders don’t want to risk that you will rack up the credit card debt, and find yourself in bigger trouble.

An automatic debit for car loan payments and mortgage payments makes sense. However, there is no reason for your automatic payments for subscriptions and other bills to be from your checking account. Credit cards come with certain protections that checking accounts don’t have, and in some cases, it can even be easier to cancel your recurring payments when you use a credit card.

So, before you just sign up using your checking account, think through the situation, and consider using a credit card instead.