How to use automatic payments to your advantage
Missing a payment can happen to the best of us, but it can lead to late fees and interest charges. Missed payments can also hurt your credit score, which can mean higher loan rates and insurance premiums. One way you may be able to avoid all this is by setting up automatic payments.
How automatic payments work
Automatic payments allow you to pay recurring bills on a specific day, often every month or whenever the bill is due. Generally, you have two automatic payment options: through the company you’re paying or through your bank.
If you schedule directly with a company, you likely give them your payment information (generally a credit card, debit card or your bank account information) and select the payment date.
If you set up payments with your bank, you choose the payee, the amount you want to pay and the date you want the money sent. You may be able to set up automatic payments through your mobile banking app. Or you can usually find this option in your bank’s website’s online bill pay section. Bank of America customers can access this service by signing into Online Banking and selecting Bill Pay on the navigation menu.
Benefits of automatic payments
Automatic payments can be helpful for bills that remain constant each month, like a mortgage payment, car loan or student loan. They also work for bills you pay more (or less) frequently, such as child care or car insurance. Once you set the schedule, you can be sure the bills will be paid. You may also be able to set up email alerts to remind you when your payments will be sent, or to confirm they have been made.
Automating payments saves time and money compared to writing out checks and sending them through the mail. And mobile and online payments are secure, thanks to encryption techniques and other security measures put in place by banks and companies accepting online payments. Learn more about Online Banking at Bank of America.
Things to keep in mind…
Although automatic payments have many benefits, there are a few things to do to make sure everything goes smoothly:
- Confirm how long it takes for your payment to process. Knowing your bills are paid on time is one of the biggest reasons to use automatic payments. However, those payments can require a certain processing time. To avoid late fees, check with your bank as well as the company you are paying to ensure your payments will arrive before the due date.
- Make sure you have enough money in your account. If you set up automatic payments through your bank, or tell a company to automatically deduct a payment from your account, you will need to have sufficient funds available for them. If you don’t, you may risk overdraft fees.
- Review your payments. As with anything, mistakes can happen. It’s possible your cable company accidentally charges you twice in one month or doesn’t register an automatic payment from your bank. If you stop monitoring your payments because they’re automated, you could miss those occurrences.