When your payments are automated, your bills get paid. Simple as that.
Once you set it up, it’s one less thing to worry about every month. No more trying to remember due dates or where you put the stamps or if you got it in the mail. At the most, it’s a click. Then, bills paid, you move on with your day.
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For all the benefits of auto payments, there are some things to keep in mind. Read on to learn more.
First of all, the set up.
There are a couple of ways to set up automatic bill pay.
- Sign up directly with the biller. Go into their website, click on the tab that says “create an account”, fill out your information – including your bank details – and set up auto deduction.
- Sign up with your bank. This has several benefits: if you set up automatic bill pay on your checking account (or primary checking account if you have more than one), you’ll be able to monitor and manage your account balance better. Many banks also offer alerts, whether it’s before the money is withdrawn, or if your balance is getting low, so you’ll know how to adjust your payments and avoid overdrawing your account.
Convenience – Setting up the payments through your bank means your bills can be organized and viewed in one place. Depending on your bank, you’ll even get a heads up (through text or email) to let you know they’re about to take a payment. In a sense, instead of you going to them, they come to you.
Credit Score Improvement – The biggest single component of your credit score is whether you pay your bills – and pay them on time. In fact, FICO reports that negative marks on your credit history can fade over time when you are consistent with payments.
Control – When you automate your payments, you aren’t reliant on your memory or the mail to get your bill where it needs to go on time. The date is listed within your bank account, and after allowing 2-3 days for processing, the payment is sent with a click or two.
The Calendar vs Payday – If you set your rent or mortgage payment to be automatically withdrawn the 1st of every month, but the 1st of the month also happens to be the Thursday before your Friday payday, you might be caught short. When that happens, you can get overdraft fees. How to avoid that? Give yourself a calendar reminder to go into your auto withdrawals a couple of times a month to make sure the money being pulled out will be coming from an account that has money in it. If the dates don’t line up, adjust the withdrawal dates to correspond with your paydays.
Auto Takes Time – Even though it’s called “automatic,” it still takes a couple of days to process your payment and reach a merchant or service provider. Confirm how long it takes for payments to arrive so you can set payment dates accordingly and avoid late charges.
Pro Tip: Set up electronic alerts. Some banks and credit unions offer email or text reminders that let you know when your balance is running low or when a bill is due. Take advantage of this to avoid overdraft fees.