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Sometimes keeping up with manual credit card payments can be a hassle when your monthly bills start piling up. Autopay is a convenient solution to help you get those payments in, avoid late fees and protect your credit score.
What Is Autopay?
Autopay is a service provided by many credit card issuers that automatically makes your monthly payment when a statement is posted. You still control how much to pay and when the payment is deducted. For those who struggle with deadlines or are worried about missing payments, autopay is a helpful tool.
What Are the Types of Autopay?
Across credit card issuers, you’ll encounter three autopay options. These include setting the automatically paid amounts to:
- your minimum payment
- a custom amount
- your full statement balance
Paying the full statement balance is the only option that avoids accruing interest. Paying the minimum amount ensures that you’ll avoid late fees but will lead to the accumulation of interest if additional payments aren’t made. Minimum payments will vary depending on the credit card issuer and the total balance on the credit card. Setting an automatic payment for a custom amount is a third option suitable for paying off larger balances, but, depending on the amount and circ*mstances, may still result in added interest.
How Do You Start Using Autopay?
Setting up autopay can be done over the phone with a card issuer, through issuers’ mobile apps or online in your account, typically on a payments page or in card payment settings. When autopay is set up, the card issuer is authorized to debit payment from a cardholder’s bank account on a set date each month. This date may be your bill due date or a date you select when enrolling. Autopay payments will be funded from the same account previously used to pay off the credit card bill and can be canceled anytime.
Some credit card issuers may let you set up multiple automatic payments per month, which can be helpful if you’re actively chipping away at your debt and want to do so in smaller installments. If you plan on making additional manual payments in a given month, be aware that your automatic payments will still go through as scheduled.
What Are the Benefits of Autopay?
The main benefit of autopay is that it takes the hassle out of remembering to pay the bill. It provides you with a safety net—with autopay, you’ll never miss a payment deadline. If used wisely, autopay can help the more forgetful build and maintain a good credit score. Your payment history is one of the most influential components of your credit score, so making timely payments can also help improve your score over time.
How Do You Use Autopay Effectively?
Make Sure You Have Sufficient Funds To Fulfill Your Payment
Even though the payments are automatic, it’s still important to make sure the account the payment is being made from has the necessary funds. Not having sufficient funds to complete an automatic payment can lead to overdraft charges from the bank and a return payment fee from the card issuer. If it’s not caught in time, a late fee will still be charged and interest charges will begin to accrue. You could even trigger a penalty APR.
Adding your automatic payment date to your calendar to remind you to replenish your bank account can help you preserve the goal of using autopay: avoiding the charges that come with missed payments in the first place.
Always Monitor Your Statements
Don’t let autopay lead to complacency. Even with autopay, it’s good practice to review recent transactions and card statements to monitor for strange activity. Noticing any suspicious charges as they occur can lead to more expedient resolutions. The convenience of autopay doesn’t absolve anyone of responsibility for the account but can ultimately save time and stress over upcoming payment deadlines.
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Bottom Line
Credit card autopay is a convenient benefit of many credit cards and can save account holders time and hassle by paying down or paying off balances each month without additional user input. If you opt into autopay, be careful not to ignore your account. Autopay doesn’t monitor for mistakes or fraudulent charges, and you should be mindful that the accounts from which you pay have sufficient funds each month.
Forbes Advisor Credit Cards Writer AnnaMarie Houlis contributed to this article.
