The Problems of Automatic Withdrawal

Speaking of not being perfect, I ran into a string of overdrafts on my checking account, recently. My overdrafts go to my credit card, so I only get a one-time $10 fee if I go over, but it added up. The reason I was getting overdrafts? Automated withdrawals! Automatic withdrawals worked well for me when I was getting paid monthly, because I had all these withdrawals set up for the day after I got paid. Now, however, with bi-weekly paychecks my paycheck lands on different days every month, and I never fully adapted my systems and habits.

Several of these withdrawals were for tiny amounts--$5 or $10 I had going to charities or my alma mater. I like giving small amounts every month, because it adds up for the institutions and it doesn't feel like a burden to me. For now, I'm nixing this habit. I'm only going to give one-time donations to institutions. I might change back, later, but I'll have to set up some reserve fund to manage that, and I don't want to think about it right now. For now, I'm simplifying, and I asked all the institutions to stop the withdrawals.

The one that really vexed me was my auto insurance. It was a larger amount, obviously, and it kept tripping up my finances. I thought I had to pay via automatic deductions--that's how it was explained to me when I opened the account. This is only partly true. I must keep the automatic deductions option turned on, but if I pay ahead, they mark me as "paid in full" and don't deduct anything from my account. I did exactly that, which put the control back in my hands. I've put enough cash towards my insurance that I'm about 1.5 months ahead, and now I have half-month payments shipping to them every two weeks (when I get paid).

Automatic deductions are great for those who have problems remembering to pay their bills, but I like to keep my checking account balance low, so I'm not tempted to spend my "spare" cash. For me, it's far easier and safer to set up my own schedule.