Automatic Bill Pay: How It Works and How To Do It Safely

automate bill payments

Here are some of the benefits and disadvantages of using a service to automatically pay your bills. Data breaches make headlines, but online banking is no less secure than leaving a check in an envelope in an unguarded mailbox. In fact, your accounts may be better protected through the encryption techniques that banks use online to secure customers’ information. Your payment history is the single biggest component of your credit score, and FICO reports that negative marks on your credit history can fade over time when you are consistent with payments.

automate bill payments

If you’re living paycheck-to-paycheck, for instance, a higher than expected cost could cause you trouble. Automating bill payments has both advantages and disadvantages. Looking at both sides can help you decide if putting your bills on autopilot is the right move for you.

Using a credit card for automatic payments

Once you add the interest charges in, the convenience of the automated payments gets wiped out by the extra cost. But if you have stable income, keep track of your spending and have enough of a cash buffer in your bank account, the conveniences of automatic payments will outweigh any risks. Many automated billing software tools have online portals that allow customers to pay invoices using any number of payment methods, from electronic checks to major credit cards. If your business only accepts mailed-in checks, now is a good time to make it easier for customers to pay you. Automatic bill pay allows consumers to schedule automated payments for loans, credit cards, utilities, services, and more. You can schedule payments for the due date or any day prior.

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But you should never use automatic bill payment if you’re in a dispute with a collections agency over a debt you’re trying to settle. You’ll also run into fees if you don’t have enough money in your account. Depending on the situation, the payment may “bounce,” or get rejected. Then you’ll owe the company a penalty fee, plus the original amount. Automatic payments cut down on the chance of late fees, but they can increase your chance of other fees if you’re not careful.

Adding the Automatic Payment Details of an Account

The first option, online bill pay, is set up through your bank. You give your account information for each creditor to your bank, and the bank automatically pays the bills each month from an account you designate. There are two common ways that you can schedule your bills to be automatically withdrawn from your account. The company can withdraw the payment from your bank account, or you can give your bank permission to pay the bill on a certain date. Let’s say that before implementing an automated billing system, your business billed customers through the mail with net 30 payment terms. Your new system is entirely paperless, meaning there’s no delay between invoicing and customers receiving their bills, and customers can pay their bills online.

automate bill payments

Dashia was previously a staff writer at NextAdvisor, where she covered credit cards, taxes, banking B2B payments. She has also written about safety, home automation, technology and fintech. 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. When autopay is set up with your checking account, it often works best for bills that are for the same amount each month — or those that don’t vary by much. Knowing exactly how much is going to be debited in advance can help you ensure you’ll have adequate funds in the account.

Bank Fees: Everything Your Bank Can Charge You For

While we do our best to keep these updated, numbers stated on this site may differ from actual numbers. We may have financial relationships with some of the companies mentioned on this website. Among other things, we may receive free products, services, and/or monetary compensation automate bill payments in exchange for featured placement of sponsored products or services. We strive to write accurate and genuine reviews and articles, and all views and opinions expressed are solely those of the authors. Autopay is only one element of creating a budget that works.

  • Look carefully, though; you may wind up paying additional fees for this.
  • If your account balance consistently gets too low or goes negative, an automatic payment could overdraft your account, potentially resulting in late fees and penalty APRs.
  • Pay close attention to your bank account balance and upcoming automatic payments to make sure there will be enough money in your account when the payment is scheduled.
  • Such mistakes, while rare, can happen, and redressing them takes time and effort.
  • Some payments fluctuate in amount, and if you’re not careful, your account may be overdrawn.
  • It is fairly easy to find an account with APY of 3% or more.

With autopay, ACH moves the funds from your checking account to a vendor you’re set up to pay. Some banks will allow payments to be deducted even if there aren’t enough funds in the account, meaning the account holder will likely be charged an overdraft fee. Keep track that account funds are sufficient to cover automatic payments to avoid any unwanted fees. It depends on the vendor, bank and where the payment due date falls, as banks don’t typically process payments on weekends. It’s best to schedule automatic bill payments a few days before the due date, as they can take up to five business days to process.