As you sleep happily at 30,000 feet above the ground, your pilot too may be relaxing—for at that height not only the route is defined, the aircraft can be safely put on autopilot without much intervention. But to bring the aircraft to that level, the pilot would have made some efforts initially.
There is a lesson to be learnt from the pilot for your financial life. Put in some efforts initially, chart out a rough course and you will be able to put your basic financial life, at least as far as payments and investments go, on autopilot without much intervention.
From recurring transactions such as utility bill payments or monthly investments in mutual funds or credit card payments to donation to temples, you can automate most things. “We see people from all age groups opting for automatic payment,” says Dipika Kalra, associate financial planner, International Money Matters Pvt. Ltd, a Bangalore-based financial planning-cum-investment advisory firm.
However, just as the pilot needs to keep an eye around to ensure he doesn’t head to a disaster, you cannot forget about automated payments completely. Here’s how you can make your life easy and yet not lose your grip on it.
How to automate
Utility bills: These can be paid online but there are two ways to do it. Either you go online every time you receive the bill and pay individual bills or authorize the bill aggregators to present bills each month to the bank you have a savings account with. The bank just needs a one-time authorization from you to execute monthly transactions.
“There are many bill aggregators in the market who tie up with various billers (service providers). Then they approach the bank and are provided with a payment gateway,” says Suresh Sethi, group president (transaction banking), Yes Bank Ltd. This service is offered to all Yes Bank account holders.
These bill aggregators approach the biller, such as mobile telephone companies or electricity provider, with your details and ask them for your bill every month. Says Ajay Kaushal, director and co-founder, BillDesk, a payment company, “We make sure that the bills are paid on time. We are the interface between the bank and the billers.”
Similarly, payment for credit cards can be routed through your savings bank account.
Monthly investments: These, too, usually need a one-time authorization to your bank. For your systematic investment plans, you can either give post-dated cheques, or enter through electronic clearing service or online platforms. Even for recurring deposits and others, you can give standing instructions to your bank.
What to keep an eye on
Losing track: The biggest danger of putting your investments and payments on autopilot is losing track. You may forget looking at the bills at all and errors may go unchecked. “Checking bills is sacrosanct,” says B. Srinivasan, a Bangalore-based financial planner.
So you may overpay and won’t even know that you have paid extra.
Defaults: You may have issued several instructions on a particular date. But in a particularly tight month, there may not be enough balance left in your account, making you a defaulter. “Though the bank does not charge if you default, the service provider may levy a late payment fee,” says Sethi.
Wrong transactions: You spot an error in your bill but before you could act, the money got deducted from your account. There are cases of inflated bills, which could affect your budget.
Though billers usually adjust the overcharged money in the next bill, it may take a few calls and a bit of running around before it actually gets done. “Though the rectification process in general is good these days but keep monitoring transactions,” says Srinivasan.
Authenticity: Though direct debit is a safe way of transacting, you should check the credentials of the aggregator. The government has put a framework in place to make these transactions secure. “Anyone handling third-party data is mandated under the law to take utmost care. However, customers should check the credentials of the service provider. As per law, they should be ISO: 27001 certified, an international standard on personal data security,” says Pavan Duggal, a Delhi-based cyber law expert.
Additionally, some aggregators are Payment Card Industry Data Security Standard-compliant. This standard represents a set of security practices that help ensure the safe handling of card data by preventing fraud through increased controls.
Changing bank: If you are not happy with your current bank through which you have directed all payments, you need to re-route all your payments. “It is better to cancel the instructions given to a bank if you are moving the payments to another bank. At times it may result in double payment,” says Kaushal.
This problem may occur if the account with the previous bank is operational and has money in it. To discontinue direct debit, go to the bank’s website and follow relevant instructions to stop the service.
What should you do?
Check for errors: One should make of list of automatic deductions and check them regularly. Also, before ticking them off the bank statement, check individual bills for errors.
Track timing: Ensure the bills are paid on time to avoid disconnection of services. Though services can be restored eventually, you would have to run around if such a lapse occurs. “Generally, banks send mobile alerts for every transaction,” says Madanjit singh, general manager, Punjab National Bank.
Cap amount: You can put a limit to the amount to be debited from your account, especially for utility bills. This is one way to keep a check on inflated bills. “Say your average cellphone bill comes to around Rs 2,000. You can make that the upper limit. If a bill exceeding that amount comes to the bank, it will inform you about the same and you can run a check,” says Sethi.
Maintain balance: Make sure you have enough money in your account so that even if your monthly salary is delayed a bit, your payments don’t get affected. “Keep the date of debit two-three days after the usual date when your salary is credited,” says Kalra.
It would not take more than an hour to keep a check on your automated payments. If that saves you several hours of standing in queues or the problem of remembering passwords and deadlines, it’s definitely worth it.