Should I Set Up Autopay?
AutoPay is a billing feature offered by many service providers, lenders, and credit card companies that automatically handle your monthly bill payments. Setting up automatic payments can help ensure that your payments are always on time, which can keep all your accounts in good standing.
What does it mean to automate your credit card payments?
Automating your credit card billing means creating a recurring payment schedule that automatically withdraws the same amount from your bank account on the same day each month. You can choose a fixed amount each month (somewhere, $ 250), or you can choose to pay the statement balance, current balance, or minimum payment (which fluctuates each month).
How can automating help?
Chances are, you have to pay more than one bill per month. This can be a lot to keep up with, and automatic payments can help make it easier for you.
“If you’re having trouble keeping track of your bills and making timely payments, this could mean automating your credit card payments,” said Roger Ma, a certified financial planner at lifelaidout® and Author of “Work Your Money, Not Your Life.” “Select,” he says.
Setting a day on your calendar where your bank account knows exactly what to withdraw can keep you organized and ensure that payments are never overlooked.
Daniel Harrison, a certified financial planner in Columbia, Missouri, says, “A statement could easily be buried in the hundreds of emails we receive, accidentally thrown away, or lost in the mail.”
“Also, there is life, and during a stressful time you don’t even want to deal with discounts or late payments on your credit card that can affect your credit score,” she says.
Benefits of AutoPay Setup
If you are thinking about setting up automatic payments for your credit cards and other bills, here are the benefits of doing so.
It is convenient:
It can be difficult and erroneous to keep track of payments made to different companies at different times of the month. With automatic payments, payments will be made automatically on time. All you have to do is make sure you have enough money in your bank account to cover each bill.
It can help you build credit:
Accidents can happen if you ignore an email or lose a piece of mail stating that the bill is due. Late payments can cause a credit hit and can last up to seven years on your credit report. Setting up automatic payments can help you avoid missed bills, and regular on-time payments can help you set a positive date to improve your score.
It can save you money:
Some lenders offer lenders a small discount on interest rates if they sign up for self-payment, and lower interest rates can save you money over the life of your loan.
If you have a credit card that is offering 0% APR on new purchases or balance transfers, late payment may result in termination of the agreement. Using AutoPay can help ensure that payments are made on time so you can maintain the introductory deal.
Failure to pay may result in a late fee or a new, higher APR called penalty APR which credit card companies may start charging if you make late payments. Penalty APRs are usually as high as 29.99%.
How to configure AutoPay?
The process of setting up auto pay may vary depending on the financial institution, but you should be able to work online, through the app, or on the phone.
During setup, you will be asked to select the account from which you want to receive payments and the amount of recurring payments you wish to make. Options may include:
- Minimum due amount: The company will allow the minimum payment due before the due date.
- Full balance (or statement balance): The company will allow the full bill to be paid each month. If this amount fluctuates, such as with a credit card, make sure your bank account is sufficient to cover it.
- Another amount: The company will allow the amount you choose each month. This amount should cover at least the amount you owe.
Some lenders and credit card issuers may even allow you to split bills into multiple payments. For example, instead of withdrawing your mortgage or card payments at once, you can make two payments at different times of the month. This will help you to deal with the debt while spreading the payments in a way that is convenient in your monthly budget.
How much should you set as your automatic payment?
It’s up to you how much you want to set up your automatic payments for each month. According to experts, it depends on how much your income is compared to your other expenses.
Ideally, experts say don’t charge your credit card more than you know you can afford to pay. And when you have enough discretionary income, you should definitely pay your balance to avoid high interest fees.
“If you have enough cash, I’d recommend setting up AutoPay for full balance every month so you don’t have to worry about logging in and remembering to pay it off.” “Sean Anderson, a certified financial planner and consultant. Anderson President of Financial Strategy.
But what if you can’t cover the full balance on your credit card? Try to minimize on time. Simply making a minimum payment on your credit card can add extra interest, but sometimes you can do just that. If you can afford to pay at least a little more, then consider choosing a fixed amount for your budget each month and choosing this option for automatic payments.
And if your income is variable, at least automating your monthly minimum payment can help you. This will prevent late payments and protect your credit from past debts. Harrison says you can always make more payments later, but setting automatic payments to a minimum “can act as a backstop if you forget to pay,” says Harrison.
Setting up automatic payments can be an easy way to “set up and forget” bill payments. If you already have a monthly transfer schedule for savings and investment support, this is another way to automate your budget.
Remember to keep enough money in your account to pay the bill. If you do not have enough money in your bank account to process the payment, you may have to repay the insufficient funds fees from your bank and the payment fee from the company trying to pay your bill. ۔