Autopay is a way to automatically pay your bills every month, typically through a recurring bank transfer from your bank or credit union or by credit card. Late payments can cause late fees and lower credit scores, not to mention stress and headaches.
Autopay can solve all these problems and it's easy to set up.
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- Autopay can be used to automatically pay bills such as your phone bill, car insurance, or credit card bill.
- These are scheduled transfers from your checking account or charges to your credit card.
- It can help avoid late fee penalties and avoid dings to your credit score.
- You do have to make sure you have the funds available for the automatic payment or you may incur overdraft fees.
- There’s typically a simple, one-time setup and you can cancel at any time.
What is autopay?
Autopay, short for automatic payment, is an account feature that you can use to set up automatic payments for bills. Rather than manually entering payment details each month when a bill is due, your bank account will run an automatic bill payment instead. You can generally designate the amount and the specific date for the payment to run, and link it to a bank account, like your checking account, or credit card.
It is a convenient way to ensure you pay your bills on time. Automatic payments help you avoid late fees, penalties, and potential disruptions in services from forgetting to make a payment on time. It also saves time and effort as you won't need to sit down and make individual payments each month.
Related: Best checking accounts
Pros and cons of autopay
Setting up bills on autopay can financially benefit those with many due dates to remember. Others prefer full financial control.
Is autopay right for you? Some pros and cons outlined below may help you decide!
Pros
- Reduce hassle. Once it has been set up, autopay runs automatically until canceled. You don’t need to remember any payment due dates or manually call or log in online to make a payment.
- Save money. Automatic payments can help you save money by avoiding accidental late fees and potential dings to your credit.
- Space out payments. Since you can often set your own payment date for automatic payments, scheduling these throughout the month (as long as they occur before the bill due date) can help with monthly budgeting and cash flow.
Cons
- Requires updates. If you change your bank or open a new credit card that you want to switch payments over to, you’ll need to update your autopay details in order to make sure your payments will continue.
- Risk of overdraft. If you’re not keeping an eye on your automatic payments, you might find yourself short of funds when you need them. If using autopay with a checking account, this could lead to overdraft fees if you don’t have sufficient funds.
- Lack of oversight. If you’re not reviewing your transactions on a more consistent basis, it can be easy to overlook fraudulent charges or get complacent about monthly subscriptions that you may not be using.
When should you use autopay?
The purpose of autopay is to make paying your bills less of a hassle. If you are someone who has a busy schedule, you may want to consider setting up autopay so payments don’t accidentally fall through the cracks.
You probably shouldn’t use autopay if you live paycheck to paycheck or budget on a per-paycheck basis. Not having enough of a buffer in your checking account could lead to overdraft fees. The great thing is that autopay can be set up anytime, so you can always set it up when you feel financially ready.
Tips for autopay
Setting up autopay is a great way to manage your recurring bills and stay on top of your finances. Here are some tips to get started:
- Prioritize fixed expenses: Start by setting up recurring payments for your fixed monthly expenses, such as rent or mortgage, utilities, insurance premiums, and loan payments. These are consistent and essential bills that need to be paid on time to maintain your financial stability.
- Use a dedicated account: Consider using a separate checking account specifically for autopay transactions. This way, you can easily track these payments and ensure that you always have enough funds to cover them. This will help prevent overdrafts and unexpected fees.
- Set up alerts: Even with autopay, it's crucial to stay informed about your finances. Set up alerts through your bank or payment platforms to receive updates when payments are processed. This will help you monitor your account and ensure that everything is running smoothly.
- Regularly review and adjust: Your financial situation may change over time, so it's important to review your autopay setup periodically. Keep a spreadsheet with a list of bills and which accounts are set up for autopay. Make sure to update any changes in income, expenses, or due dates for bills. Additionally, review your bank statements to confirm that payments are being processed correctly.
How to set up autopay
Setting up autopay is pretty straightforward. You can generally find it when you sign into an online account for whatever service you need to pay for and look for the section called “Make a Payment” or similar.
During setup, you can decide which date you’d like the automatic payment to begin, the amount to pay, and the date you’d like your automatic payments to end (if ever).
Keep in mind that if you’re already paying the initial bill and would like to set up autopay to automatically process payments in the future, make sure to set up autopay to start the following month and not the current month. Otherwise, you might be paying the same bill twice!
Once you have gone through the setup process, some bill pay portals will send an email confirmation, while others may simply have an autopay icon that you can see has been enabled.
It’s a good idea to keep an eye on your bill pay account for the first month or two afterward to ensure the necessary bills have been processed correctly.
FAQs
Does autopay cost anything?
The autopay feature itself is typically free. However, depending on your method of payment, you may incur additional transaction fees, such as credit card processing fees.
What’s the difference between bill pay and autopay?
The key difference between a bank’s bill pay service and autopay is the frequency. Bill pay is typically a one-time payment from your bank account or credit card, while autopay is set up to make recurring payments on a specific date, usually as an electronic/ACH transfer.
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