How To Use Autopay To Manage Your Finances

Autopay allows you to pay your bills every month through recurring transfers from your checking account. This automated process helps ensure your bills are paid regularly and on time, potentially saving you from late fees and missed payments. You can often use autopay for various expenses such as your mortgage, utilities, car loans and subscription services.

If you’re tired of manually paying bills each month or frequently miss payment deadlines, setting up automatic payments might be right for you. It’s relatively easy to set up and can help simplify your money management. Here’s what you need to know:

What is autopay?

Autopay is a way of paying a bill automatically each month on an agreed-upon date. Your bank may allow you to schedule these payments through its automatic bill payment feature, or you can set up autopay directly with a vendor (such as your cable company or your gym) by authorizing them to take the payment from your checking account on a recurring basis.

As an alternative to having bill payments debited from your bank account, the payment amount can sometimes be charged to your credit card by a vendor every month.

How autopay works

Automated payments from your checking account are usually processed through the Automated Clearing House (ACH). This nationwide network enables banks to transfer money electronically. With autopay, ACH moves the funds from your checking account to a vendor you’re set up to pay.

When establishing autopay with your checking account, it often works best for bills that have consistent amounts each month — or those that don’t fluctuate significantly. Knowing exactly how much will be debited in advance helps ensure you maintain enough funds in your account.

What types of bills should I use autopay for?

Many of your monthly bills can likely be paid for via autopay. These can include:

• Mortgage payments or rent
• Auto loan payments
• Monthly insurance premiums
• Gym memberships
• Streaming services
• Internet and phone bills

Bills with amounts that can vary significantly each month may be best handled manually to avoid an unexpected cost. This can give you time to ensure there are adequate funds in your account and allow you to select what date you want to send the payment, accordingly.

Such variable payments may include credit card payments, electric or gas bills and water bills.

“For variable bills like utilities, consider setting up automatic payments for the minimum amount due to avoid late fees. Then, you can manually pay the additional amount after reviewing your statement. This gives you control over the timing and amount, while still ensuring you never miss a payment deadline.”

— Hanna HorvathCFP

Many credit cards allow you to set up automatic payments for just the minimum balance. This helps you avoid missing a payment and potentially incurring late fees or interest rate increases. But it’s always a good idea to check your balance regularly so you know what you will owe.

Even with mostly predictable bills, such as a subscription service, prices can increase unexpectedly. Regardless of using autopay, it’s still important to know what you are being charged each month. Having bills on autopay may mean unused subscriptions or other charges continue without your notice.

How to set up automatic payments

Setting up autopay is typically straightforward and can be done in a few different ways:

Through your bank’s bill pay service

Most banks offer online bill payment services that allow you to schedule recurring payments:

1. Log in to your online banking account
2. Navigate to the bill pay section
3. Add the vendor or service provider as a payee
4. Set up recurring payments by specifying the amount and frequency
5. Choose the date for payments to be processed

Directly with the service provider

Many companies offer autopay options through their websites or mobile apps:

1. Create an account on the vendor’s website or app
2. Navigate to payment settings or billing preferences
3. Enter your bank account or credit card information
4. Set your payment preferences (date, frequency)
5. Confirm and save your settings

Using a third-party bill payment service

Some consumers prefer using third-party services to manage multiple bills in one place:

1. Sign up for the bill payment service
2. Link your bank accounts and bills
3. Set up automatic payment rules
4. Monitor all your autopay arrangements in one dashboard

How autopay can help with money management

Autopay can be very useful for those who worry about forgetting payments or who procrastinate when it comes to bills. It simplifies money management for anyone feeling overwhelmed by manually paying monthly bills for expenses like mortgage, student loans, tuition, insurance, utilities and subscription services.

What’s more, paying your bills on time is good for your credit score. Payment history accounts for approximately 35 percent of your FICO score, making it the most influential factor. Making late payments can lower your credit score and cause lenders to view you as high risk.

Pros and cons of automatic payments

Whether autopay is right for you depends on your own money management preferences and what types of bills you’re paying.

Pros of autopay

• Bills won’t be late: Since they’re on a set schedule, your bill payments will be debited on time, so you won’t be charged any late fees.
• It can help your credit score: Payments for bills such as your mortgage or car loan usually show up on your credit report, and anyone who views this report — such as potential lenders — will see your bills are being paid on time.
• It saves time: This is especially true for those who have many bills to pay every month. Setting up autopay is a one-time task, and paying the bill won’t require any time going forward.

Cons of autopay

• Your account can become overdrawn: An automatic payment can put your checking account in the red — which may also result in an overdraft fee — if you forget it will take place and don’t have the funds to cover it.
• Errors may be overlooked: With autopay in place, you may feel the need to log onto your bank account less frequently — which means you’re less likely to notice if any billing errors take place.
• Unused subscriptions: Not taking the time to manually pay your bills each month may cause you to go several months without realizing you may be paying for things you no longer use, such as streaming services or gym memberships.

FAQs

Can you get a discount on bills for setting up automatic payments?

Yes, some companies offer discounts if you enroll in automatic payments. Verizon Wireless and Xfinity are two examples of places you can score a discount for auto pay. Additionally, many insurance companies provide small discounts for customers who set up automatic premium payments.

How can I cancel my autopay?

How to cancel autopay depends on the company. Typically, you can do this right online on a page where you manage your account and billing settings. You can contact the company directly for specific instructions on how to cancel your autopay. If you have an issue with payment still being charged, you can also contact your bank.

Why do companies want you to use autopay?

Companies want you to use autopay because it ensures timely payment and can save time and money.

Bottom line

Using autopay can ensure your bills are paid on time each month with less effort than paying them manually. However, it’s still important to log onto your bank account regularly to ensure there are enough funds to cover the bills, as well as to catch any errors or instances of fraud.