Automation promises an easy way to send and receive cash from your accounts on demand. But it’s not a perfect financial solution for every person. Let’s look at the two main benefits of automation before shining a spotlight on the dark underbelly of this option.
2 Benefits to Automating Your Finances
Here are the two biggest advantages of automating your finances today:
1. Direct Deposit
The term direct deposit involves having funds electronically transferred to your bank account instead of using cash or checks.
If you have borrowed money recently, there’s a good chance you benefited from direct deposit without realizing it. Many lenders now offer direct deposit loans if you borrow online.
So, what is a loan with direct deposit? It works like any average personal loan to give you the cash you need, except your approved funds arrive automatically in the account you supply during your application. This speedy deposit style can help you in emergencies when you need to make urgent repairs quickly.
While many people borrow direct deposit loans, even more people rely on direct deposit on payday. According to an American Payroll Association (APA) survey, 93% of Americans receive their wages as direct deposit. That means, money appears in their accounts automatically, without any work on their part.
Whether used as a loan or paycheck, direct deposit allows for a convenient way to receive funds without having to go to a bank branch or ATM. These electronic payments save you time, and you can count on them to happen like clockwork.
2. Paying Bills
Another major benefit to automating your finances is how easy it is to pay bills. You can authorize your bank to transfer money out of your account to specific payees on a regular schedule. Whether it’s weekly, bi-weekly, or once a month, your bank will never miss these payments.
Most creditors make it easy to setup automatic payments with their billing departments. In fact, you might receive a slight discount by making electronic payments over old-fashioned checks sent in the mail. Or, at the very least, you’ll avoid a fee for processing cash and check payments.
Automation here is a boon to forgetful people everywhere. With your bank keeping track of due dates, you’ll never forget to transfer cash to creditors or savings funds. As a result, you’ll pay your bills on time, avoid late fines, and prevent negative payment history from impacting your credit score.
Watch Out for These 2 Problems with Automating
While automation offers time-saving convenience, you could hit some financial snags if you don’t checkin with your accounts often. Here are two issues that can arise through automation:
When we said your bank will never forget a due date, we mean it — even if there isn’t enough cash in your account to make that payment. The AI responsible for making these payments must follow the rules, and it doesn’t have the creative thought to pause these payments when you don’t have the money.
This can pose a problem for people who live paycheck to paycheck and miscalculate how much money they have.
If your bank attempts to make these payments when you have insufficient funds, you’ll get dinged. You could face the one-two punch of your bank’s overdraft and Non-Sufficient Fund (NSF) fees in addition to your creditor’s late fines and added interest on missed payments.
2. Lack of Oversight
With automatic payments and deposits setup, you can feasibly walk away from your finances and never check in on your accounts. But you shouldn’t, even if you aren’t worried about overdrawing your account.
When you let computers do everything, you can easily lose track of what’s happening with your money. You might not realize you’re sending more than you should every month to your cell phone carrier, or you could overlook errors and fraud in your credit card account.
Now you understand the risks of automating your finances, you can make an informed choice about whether it’s the right money management style for you.