Should I Set Up Autopay?

A man wearing a gray shirt looks up to the ceiling while he holds his phone in one hand and his credit card in the other.

Autopay is a billing feature offered by many service providers, lenders and credit card companies that automatically handles bill payments for you each month. Setting up autopay can help ensure your payments are always made on time, which can keep all of your accounts in good standing.

Benefits of Setting Up Autopay

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

It's Convenient

Keeping track of payments going out to various companies due at different times of the month can be difficult and prone to error. With autopay, payments will automatically be made on time. All you need to do is make sure there's enough money in your bank account to cover each bill.

It Can Help You Build Credit

Accidents happen—maybe you overlook an email or lose a piece of mail that says a bill is due. Late payments can cause a credit hit and can stay on your credit report for up to seven years. Setting up autopay can help you avoid missed bills, and paying on time consistently can help you establish positive history to improve your score.

It Could Save You Money

Some lenders give borrowers a small interest rate discount if they sign up for autopay, and a reduced interest rate could save you money over the life of your loan.

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. Using autopay can help ensure that payments are made on time so you can keep the introductory deal.

Missing a payment could also result in late fees or a new, higher APR called a penalty APR that credit card companies may begin to charge if you pay late. Penalty APRs are typically as high as 29.99%.

How to Set Up Autopay

The process of setting up autopay can vary depending on the financial institution, but you should be able to get the job done online, via an app or over the phone.

During setup, you'll be asked to choose the account you want the payments to come from and the amount of the recurring payment you want to make. Options may include:

  • The minimum amount due: The company will authorize the amount of the minimum payment due before the due date.
  • The full amount due (or statement balance): The company will authorize a payment for the entire bill each month. If this amount tends to fluctuate, like with a credit card, make sure there's enough in your bank account to cover it.
  • Another amount: The company will authorize an amount of your choosing each month. This amount should at least cover your minimum amount due.

Some lenders and credit card issuers may also let you split bills up into multiple payments. 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. This could help you tackle debt while spreading out payments in a way that's easier on your monthly budget.

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.

Just remember to keep enough money in your account to pay the bill. If there isn't enough money in your bank account to process the payment, you could get hit with non-sufficient fund fees from your bank and return payment fees from the company attempting to pay your bill.

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 when there are changes to your Experian credit report and score, and if any suspicious activity is detected.