No one wants to miss a payment on a loan, cell phone bill, or utility bill and risk the consequences, which can include canceled service, late fees, and a downgrading of your credit score. Automatic payments are a great way to avoid this problem.
Here is the “What, Why, and How” about automatic payments, and how to set them up!
What are automatic payments?
An automatic payment is an arrangement with a creditor that allows the creditor to withdraw money on a set date and for a set amount from your checking or savings account, or to charge a certain amount on a certain date to your credit card. The automatic payment is usually used for regular monthly payments such as rent, utility bills, and loans.
If you set up the automatic payments with a credit card, the payments act as a recurring charge on your account until you stop them. For instance, you might pay with automatic payments for your Spotify account. In that case, you simply link your credit card to your Spotify account and Spotify will charge you every month. That’s it!
If you set up the automatic payments with a checking or savings account, the payment is made through “ACH payments” (ACH = Automated Clearing House), an electronic payment system that is free and easy to set up. You can give your bank information about the accounts you’re paying to, and the bank will automatically pay those bills from your checking or savings account. You don’t need to give your routing number or account number to anyone (including the payee), because your bank will be in charge of the transactions. In other words, your information will stay private and your account won’t be at risk.
Why you should set up automatic payments?
There are lots of benefits to setting up automatic payments:
- Save money: Some lenders offer interest-rate reductions for customers who set up automatic payments.
- Convenience: You don’t have to remember every bill and due date, and, of course, you don’t have to visit several websites manually at various times during the month to get everything paid, because once you set up the automatic payments, your bills will be paid at the predetermined time.
- Avoid late-payment penalties: Once you set up automatic payments, you won’t risk missed payments because you don’t have to remember to pay. This can help you avoid penalties.
- Improve your credit score: With automatic bill pay, your bills will be paid on time. The more often you pay on time, the better your credit score.
How do I set up automatic payments?
Go directly to the vendor’s website
- Most vendor websites have an option to set up automatic payments. For instance, if you are paying an MPOWER Financing student loan, you will have the opportunity to set up automatic payment through the customer portal, where you can provide your bank account details once the funds are disbursed.
Go through your bank
- You can also set up an automatic payment through your bank. For instance, if your checking account is with Chase, you can log in to your Chase account and go to the Pay Bills section. From there, you can enter the information, such as the account number and the payment address, to finish setting up the automatic payment.
Give automatic payments a try
If you haven’t set up automatic payments yet, you should at least give it a try because it can make your life a lot easier and save you time. If you still have concerns, you can always set up electronic alerts for your bills through email or text, which allows you to get a reminder in advance of your due dates and helps you make sure you have enough money to cover the balance.
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