Should I Set Up Autopay?

Quick Answer

Setting up autopay can help ensure your payments are always made on time, which can keep all of your accounts in good standing and help your credit score.

A smiling woman using her mobile phone to set up automatic payments.

Autopay is a billing feature that automatically handles bill payments for you each month. Many service providers, lenders and credit card companies offer it as a way to make sure you never miss a payment. Using this feature is a way to help keep all of your accounts in good standing and avoid consequences such as late fees and credit score harm. Read on to learn more about the benefits of autopay and how to set it up.

Benefits of Setting Up Autopay

If you're thinking about using autopay for your credit cards and other bills, here are the advantages of doing so.

It's Convenient

When you set up autopay, you don't have to remember to pay multiple service providers and creditors each month. Instead, payments are automatically deducted from your chosen bank account. You just have to make sure you have enough money in your account to cover what's due when bill amounts are debited.

It Can Help You Build Credit

Payment history on credit accounts is the most influential factor that affects your credit score. Setting up automatic bill payments for loans and credit lines is a way to establish a positive credit history that improves your credit score and avoid late payments that can drag your score down.

It Could Save You Money

Some lenders give borrowers a small interest rate discount for using autopay, and a reduced interest rate could save you money over the life of your loan. Using autopay can also save you money by helping you avoid late payment penalties.

When a payment is past due, credit card companies may charge late fees or a new, higher APR called a penalty APR. Penalty APRs can be up to 29.99% depending on the card issuer. Additionally, if you have a credit card that's offering an intro 0% APR on new purchases or balance transfers, paying late could result in that deal being terminated. Losing that 0% APR can be costly if you have a high credit card balance.

How to Set Up Autopay

The process of setting up autopay can vary by service, but you should be able to get the job done online, via an app or over the phone. Here's how the process generally works:

  1. Log in to your account. Use your username and password to sign in to your credit card or service provider's account.
  2. Go to payment options. You may see an option to set up or enroll in autopay on the payments page.
  3. Choose how much you want to pay. Credit card companies usually ask for the amount of the payment you want to make automatically. Options may include the minimum due each month, the statement balance or another fixed amount of your choosing.
  4. Choose the payment date. In some cases, you may choose a payment date that works for your budget; you may also be able to split up your autopay amount between two dates. For example, instead of your mortgage or card payment being withdrawn all at once, you could make two payments at different times of the month.

What to Remember When Using Autopay

Even if you set up autopay for your credit card accounts, it's a good idea to regularly review your statements to verify that each transaction is accurate. If not, you could miss incorrect or fraudulent charges that should be reported right away.

You'll also want to make sure that you keep enough money in your bank account each month to cover all the bills that will be debited. If your bank account doesn't have enough cash in it to make the payment, you could get hit with non-sufficient fund fees from your bank and returned payment fees from the company attempting to pay your bill.

The Bottom Line

Setting up autopay can be a convenient way to "set and forget" bill payments. If you already have monthly transfers scheduled for savings and investing contributions, this is one more way to automate your budget.

If you're thinking about using autopay to build credit, signing up for free credit monitoring with Experian can help you keep track of your credit score and the information on your credit report. Plus, you'll receive alerts if any suspicious activity is detected and when there are changes to your Experian credit report and score.