One of the things you learn when you get out on your own is the importance of paying your bills on time. Failure to do so can result in bad credit, late fees, and trouble with the law in some cases.
Fortunately, you have a lot of tools you can use to make sure that your bills are paid when they need to be, including sending a check, paying online, or paying directly from your bank account, also known as an Electronic Funds Transfer (EFT).
Of the many bills you can pay using an EFT, your car insurance is one of the most important. You must have car insurance to drive your car legally in most states, so you might as well make it as easy as possible when doing so. But did you know that many insurance companies give you a discount for these automatic withdrawals?
What Is an Electronic Funds Transfer (EFT)
An electronic fund transfer, also known simply as an EFT, allows you to easily move money from one account to another. In addition to moving money from your bank account to another one at the same bank, you can use an EFT to move your funds to another financial institution.
Done electronically over a computer network, an EFT is a paper-free method of doing business, which also includes paying your bills, such as your car insurance. All of this is done through the Automated Clearing House (ACH) network, which makes the process safe and secure for the transfer of funds.
While there is a fee for some transaction, such as getting money out of an ATM, others are totally free. The different types of EFT payments include direct deposits, wire transfers, personal banking, and sending electronic checks. It is this last one that’s important when it comes to getting an EFT discount with your car insurance company.
Using EFT to Pay for Your Car Insurance
Most car insurance companies will accept an EFT as a form of payment. Insurance companies even encourage this practice by offering an EFT discount for drivers. With an EFT, the bank automatically withdraws an agreed upon amount to pay for your car insurance policy. Car insurance companies like it because it guarantees that you will pay on time.
The average discount for using an EFT is 2% to 3%. And while this might not seem like much, coupled with other discounts, it can add up. This translates into savings that you can use for other things, including paying for your other bills, putting it into savings, or using it for a night out with your family or friends.
Advantages and Disadvantages of Using EFT to Pay Your Bills
In addition to using an EFT to pay for your car insurance, you can use the method of payment for a variety of other financial tasks. But an EFT is more than just a quick and easy way to pay your bills; it also has many advantages … and a few disadvantages. Here are just some of the advantages and disadvantages of EFT.
Advantages of using EFT
- The convenience of EFT cannot be overstated. Gone are the days of having to physically pay your bill, or having to do so by mail.
- Using EFT also ensures that your bills will be paid on time. This also helps improve your credit score. So, a win-win.
- By using EFT, you give any potential identity thieves less chance to steal your identity.
- Some credit cards also reward customers who automatically charge their monthly bills to the card. This can amount to hundreds of points a month, which you can spend on other things.
- EFT is also very eco-friendly due to the reduction in paper used when you pay your bills. In addition, by using EFT, you can eliminate having to use stamps, which can get expensive if you send a lot of mail.
Disadvantages of using EFT
- Sometimes there are fees for using EFT. The best way to deal with this is to look at the cost and decide at the time if it is worth it to you.
- If you do not have enough money in your account when the EFT is withdrawn, you face paying overdraft fees.
- You could lose track of a payment and risk making mistakes with your bank account. It is important to keep a list of your current bills and when they are due to avoid this.
- Stopping an automatic payment is sometimes a hassle. This is made even worse if you have to get a new card with a new number that you have to then add to the accounts you use EFT with.
- If you use your credit card to make EFT payments then you can easily run up a credit card balance. This can leave you owing more than you can afford. To avoid this, treat credit card EFT payments like any other account and keep track of what is going out.
EFT offers an excellent way to easily pay your bills, including your car insurance, and doing so has many benefits. To save money on your car insurance, ask your insurance agent about what discounts they offer, including an EFT discounts.