Paying your regular bills automatically can make your financial life easier. Putting mortgage, auto loan, utility and other bills on autopay means you don’t need to keep track of due dates or remember to mail checks or make online payments.
By setting up automatic bill pay, you can also save money — and that’s not all. Check out six ways to improve your credit, avoid late payments and save money with automatic bill pay.
6 Ways Automatic Payments Save You Money
Signing up for autopay is advantageous — if you have enough money to pay all your bills. Only sign up for automatic payments if you know you’ll always have enough cash in your account to cover all your bills at once. If you can afford it, automatic payments can streamline your bills. Here are six ways automatic payments can save you money:
1. Companies Might Give You Discounts
Some companies offer discounts or special bonus offers when you sign up for automatic bill pay, according to Kendal Perez, savings expert at CouponSherpa. The reason for this is simple: Bills that are paid automatically are more likely to be paid — and paid on time — which saves companies money and time.
For example, Verizon Wireless offers a discount for using autopay on some plans and Cricket Wireless credits you $5 every month you use it. “As a consumer, always ask if there’s a discount for autopay,” Perez said. “In some cases, a service provider might offer one to secure your business.”
Depending on the loan provider and lender, recent college graduates can take advantage of a discount on student loan interest rates. Some Nelnet users, for example, can benefit from a 0.25 percent interest rate reduction.
2. You’ll Avoid Late Fees
Service providers often charge fees for late payments — and those fees can add up quickly. Although late fees are limited by the terms of your credit agreement, companies can charge them even if you mail your payment on time but it arrives late. Credit card issuers will sometimes raise your interest rate if your payment is more than 60 days late, which would cost you money over time.
If you set up autopay so that your bills are paid several days in advance — to account for weekends and holidays — you should be able to avoid late fees altogether. “Late fees are tough on budgets, so autopay is a great way to avoid those consequences,” said Perez.
3. Your Credit Score Will Likely Improve
Consistently paying your bills on time will improve your credit score. A higher credit score gives you access to more favorable interest rates, which can save you a lot of money. Getting a quarter- or half-point reduction on your mortgage interest rate, for example, can add up to thousands of dollars of savings over the course of a 30-year mortgage.
4. You’ll Save Time
Time is money — and autopay can save you a lot of time. “Keeping track of due dates and setting aside time each week to pay bills can be a nuisance, depending on your schedule,” Perez said. “Autopay saves you time while ensuring your bills are getting paid.”
5. You’ll Stop Paying Overdraft Fees
You can choose your due dates when you use autopay, so coordinate them with your pay dates. If you set up your autopay dates close to your payday your bills will get paid — and you’ll know how much you have left over for everything else. You’ll also avoid paying an overdraft fee for any bills because they’ll get paid first. Alternatively, if you get paid biweekly, you can stagger your due dates so that your payments come from some of each paycheck rather than eating up a whole paycheck at once.
6. Sign Up for Paperless Billing to Save More
When you sign up for autopay you can also request paperless statements — in fact, some companies require you to go paperless if you’re on autopay. Signing up for paperless statements means you won’t be paying for hard copies, which typically cost about $2 — you won’t retire on your savings from this, but you’ll also be helping the environment, which is a good thing.
A Few Words of Caution
Track your automatic payments so you don’t forget when a payment is being made. Check your statement online to make sure it has no unauthorized charges, rate increases or hidden fees.
Keep a list of the bills you have on autopay and the dates payments are withdrawn. Remember that the date the money comes out of your bank account might be different from the date the bill is actually paid. Account for the processing time, which can take a few days, when you choose payment dates.
If you handle it correctly, autopay can save you money and time — and even help you improve your credit score. In addition, it will help you keep your financial house in order.
Terence Loose contributed to the reporting for this article.