In the modern era, everyone should set up automatic payments for their billing process if they can. Over time, our lives become digital, so it only reduces the stress of remembering when to pay a bill and doing all the processes manually. An automatic bill payment is a money transfer process. In this process, a bill is scheduled on a predetermined date to pay a recurring invoice. Automatic bill payments are the regular payments made from a banking, brokerage, or mutual fund account to merchants.
Automatic Payments
What Are Automatic Payments?
You schedule these payments as the firm receives the funds. But they may also be set up by the online bill pay service of a firm’s checking account. An electronic payment system performs the automatic bill payments process. The method of automated bill payment is similar to automated Clearing House (ACH).
How An Automatic Bill Payment Works
A person can plan an automatic bill payment in many ways with the collaboration of his/her bank, financial institution, Vendor online web services, or cloud-based accounting software as regular payments can be made through credit cards, debit cards, current accounts, or many money market accounts. When you schedule the amount, the charge is made from the buyer’s financial institution directly to the merchant account via an electronic payment process.
Once the automatic bill payment method is confirmed, you authorize the Vendor to charge the buyer’s bank account for the specified month’s amount. Now it’s up to the customer whether he/she can stop the payment or can be able to reschedule the price.
How To Set Up Automatic Payments
In most cases, the automatic payment is made directly to the creditor or seller, but you can also make it directly to your bank. You may need to manually set up an online invoice payment, send a paper cheque, or pay by phone if the billing agent does not accept recurring payments. If you receive a payment and write it on your credit card bill before it is due, consider the possibility of falling behind in setting an automatic payment date. Automatic payments can be made via your checking account or credit card and can even serve as a backup to ensure you don’t miss a payment. In some cases, you can also make an automatic payment by phone, email, or post if your invoicers do not accept recurring payments (e.g., for a monthly or annual bill).
Once you have completed your automatic payment, you can confirm the date, amount, and payment schedule. Track all invoices that you paid with automatic payments and these you didn’t. Confirm recurring payments with your credit card company or bank and confirm your date, amount, and schedule with the accounting office.
Automatic Payments in Paypal
Search the Payments section of your PayPal account for “Autopay” or “Set up an automatic payment,” go to it, log in with your login details and do so.
Avoid Rejections
Therefore, it is a good idea to check your credit card statement every month, even after you set up automatic payments. Make sure that there is enough money in your bank account when you make the planned payment. Automatic payments could help you evaluate your credit card, but you need to schedule payments and be aware of your impending automatic payment.
Pros And Cons Of Automatic Payments
Here are some pros and cons to consider before opting for automatic invoice payment in particular. Automatic invoice payments are when you owe money to a company for service and commit to having the money withdrawn from your bank account at a regular, preset time. An excellent current account has automatic bills and other features, but here’s a quick look at some of the pros and cons, and benefits of automated payments before you sign up. Online invoice – pay is the service that allows you to set up electronic payments for your invoices online.
Benefits Of Automatic Bill Payment
There are many benefits of automatic bill payment. Scheduling automatic payments using a bank account or credit/debit card is not a complex process. Setting up automatic payments gives you the ability to use your credit card and earn rewards without remembering to pay your balance off monthly. Another advantage of setting up an automatic payment is that it can save you late fees and hits on your credit card bill, which carries the risk of forgetting what time you pay your credit card bills.
Time
You can save your time in this way. You don’t need to process your bill manually every month.
Money
Some vendors offer some discount if you choose an automatic payment method, or banks can also reward while performing automatic payment.
Increase Credit Score
You can raise your credit score while paying your bill with an automatic payment method.
Avoid Penalties
Automatic bill payment helps you to avoid costly late fees and penalties.
Budget Management
Once you become habitual of making bill payments automatically, it will become easier to manage your budget and expenses. In this way, there will be clear visibility of your amount, which remains in your account after deduction.
Disadvantages Of Automatic Bill Payment
Technology is not perfect, and when you pay your bills automatically, sometimes things go wrong, and your payments don’t go through. There are many reasons you shouldn’t rely on automated payments to pay your credit cards and bills on time every month.
Overdraft
Automating payments can be at high risk of over-drafting your account if you are not paying attention to your account details.
Nonsufficient Funds
Your account can go under cash flow sometimes, which leads to steep fees.
Not Online Billing Facility
Not all merchants may provide an automated method of payment.
Irregular Salary
If your income is regular, you could not set up automatic payment because of the non-stability of your amount.
Card Expires
If you’re paying your bill through your credit card or debit card, then you’ll need to remember to update your information when your card expires. Otherwise, your automatic payment may not be processed successfully, or you face late fees or high penalties.
Forget To Unsubscribe
If you forget to unsubscribe, an automatic bill payment you’ve put in place means you could continue to pay for services that you no longer use.
Are Automatic Payments A Good Idea?
If you need to pay off your Netflix or Hulu subscription monthly, you can set up an automatic payment that allows you to charge your credit card. As mentioned earlier, failure to carry out the planned automatic payments will result in a higher risk of late charges than using credit cards with Autopay.
There are many benefits of automatic bill payment that are details mentioned above. It is beneficial when you thoroughly manage and monitor your account transactions.
Ensure your monthly expenses are consistent and your income is stable, then automatic payment is not less than a blessing. But if your income is not regular or you have an irregular salary, then there is a high risk of disaster.
Remember that setting up automated bill pay does not permit you to ignore your finances thoroughly. Its sole purpose is to help you avoid late payments and reduce your finances’ stress and time.
So, It’s also important to take notice that, even though you set up your automated payments and they are still running smoothly, you can also double-check your billing statements for errors regularly. Focus out for changes in rates and sums owed, as well as any unusual one-time costs that might throw you off.
Do Banks Charge For Automatic Payments?
As we all know, automatic payments can help us to avoid late fees on our bills. It is worth considering that when we forget to track our account balance, and it becomes low due to specific reasons, we have to pay an overdraft or NSF fee if our payment is due. In this case, both the bank and company can put penalties or some fee if our account is under cash flow.
The Bottom Line
Once set up, automatic bill payment will help you manage your expenses with little effort and reduce the amount of time you have to spend each month, making sure you pay your bills on time.
Start with a few bills to get used to the scheme. Review your allocated cash to ensure it can cover your preset bill payments. And double-check your statements for modifications or errors daily if you want to use automatic bill pay.
