People are always looking for ways to simplify their financial responsibilities, and using autopay is one option to do that. Automatic payments are a convenient way to pay recurring bills without having to initiate by-mail, in-person or online payments each time. Think of it as putting your bills on autopilot. To decide if this option is right for you, consider the pros and cons of using automatic payments. Keep your bills organized, and automatic payments can even save you money.
How Does Autopay Work?
Once the payments are set up, the funds are taken from your bank account at the scheduled time. Types of expenses that can be put on autopay include auto and mortgage loans, credit cards payments and any other bill that requires a recurring payment, such as your electric bill.
Pros and Cons of Automatic Payments
Automatic payments can be incredibly convenient, but if you don’t time things correctly, this setup could leave you with hefty overdraft fees to pay. Here are some pros and cons of autopay to consider:
Advantages of Automatic Payments
Automatic bill pay offers a few helpful benefits:
- Paperless billing is environmentally friendly. When you sign up for paying bills automatically, you often do away with paper billing and the need to mail payments in, which lowers your carbon footprint, said Kendal Perez, savings expert at CouponSherpa. Signing up for autopay and allowing a company to use automated billing is a way to benefit the environment while managing bills.
- You save time. “Keeping track of due dates and setting aside time each week to pay bills can be a nuisance, depending on your schedule,” said Perez. “Autopay saves you time while ensuring your bills are getting paid.”
- Due dates are more convenient. “When you sign up for autopay, you’ll usually have the choice of the date that the payee draws the money out of your bank account,” said Perez. This means you can ensure the due date is on, say, the day after you get paid, reducing any stress about having enough money in your account and making it easier to manage bills.
- You can avoid late fees. Once you set up automatic payments, they will occur on a scheduled basis. Your payments will never be late again.
Disadvantages of Automatic Payments
Not everything about autopay is beneficial. Automatic online payment options also come with some potential drawbacks that you should consider before signing up:
- You could overdraw your bank account. “If you’re not careful, using autopay may result in an account overdraft, which can then lead to overdraft fees from your bank, and possibly fees from the bill collector,” said Perez. To avoid this, she suggested choosing a date during the month when you are confident sufficient funds will be available.
- You could overlook billing errors or overages. “The ‘out of sight, out of mind’ nature of autopay is convenient, but it can also be problematic if there are billing errors, interest hikes, hidden fees or other overages,” said Perez.
- You could get tangled in a maze of recurring charges and have difficulty getting out. For example, gym membership providers might require a certified letter to cancel auto billing, according to Trim, an artificial intelligence assistant that helps save consumers money.
- Your account information stays on file. Using autopay means all your information is in the service provider’s system, and likely stays there even after you move to a different provider.
Must Read: 9 Bills You Should Never Put on Autopay
Should I Set Up Autopay?
When managed responsibly, autopay has some real advantages: saving you time every month, avoiding late fees and preserving your peace of mind. Autopay might not be right for you, however, if your monthly finances fluctuate, you are not able to keep up with monitoring your accounts, or you prefer that your financial information is not on file with various vendors.
If you try autopay but do not like it, you can always contact your creditor and cancel automatic payments, as long as payments are not already in the payment processing stage.
Cynthia Meason contributed to the reporting for this article.