Automatic payment is an agreement between a creditor or bank. In this agreement a creditor agrees to get funds or an amount from a credit card, checking or savings account to pay a bill on a regular basis. It’s commonly used for monthly payments like a mortgage, rent, or utility bills.
In Simple words, when you set up an automatic payment. You’re directing your bank to transfer money to pay a bill on a specific day and for a specific amount. Automatic payments are made with a checking account or a credit card. In this case, there is a direct connection between the creditor and the vendor. But It can also be transferred through a bank account.
How does it work?
With real-life examples, when automatic payments made with a credit card, are simply a recurring charge on your account. You could, for example, do this with your Netflix account. In this situation, you authorize Netflix to charge your credit card on a monthly basis.
Benefits of Automatic payments
The following are some of the benefits of making automatic payments:
● There will be no late payments.
Have you ever faced a problem while paying a bill or group of bills—due at the most inconvenient time? Automatic payments can help you keep track of your money throughout the month. So, you always have enough money to pay your bills, regardless of when you get paid. So, there will be no late payment.
● There will be less time spent drafting bills.
Automatic bill payment is extremely convenient because it relieves you of the burden of remembering to pay your bills. Consider all of your expenses: rent, utilities, cell phones, subscriptions, credit cards, and perhaps other debts. No need to take stress or spend maximum time on drafting bills.
You don’t have to remember to pay your bills with automatic bill pay. Simply schedule the payments, and they’ve taken care of—no late fees and no stress for you.
● Postage costs were reduced automatic payments.
With an automatic payment pay method, you no need to go to a bank or company to pay your bill. No Doubt it reduces postage costs and you are free to focus on your personal goals.
● Secure Payment Method
One of the main concerns that people, particularly nerds, have about automatic bill payment is online security. They are unsure if their financial information is truly secure. To overcome this fear they assure the online payment are end-to-end encrypted.
Furthermore, online security has vastly increased. The Federal Trade Commission (FTC) and other organizations assist businesses in carefully handling Users’ personal information.
What’s the best way to set up automatic payments?
There are three common ways to set up an automatic payment.
1. Go straight to the vendor.
The first option is to go straight to the company, vendor, or creditor you need to pay.
Let’s imagine you have a $500 automobile payment and your loan is funded by Chase. For this purpose, you can set up an automated payment on Chase’s website to be taken out for billing every month.
You just need to simply enter your checking account details and the date on which you want the payment to be made each month. In many circumstances, you can choose whether the money is sent on or before the due date.
2. Setting up an automated payment through your bank.
Setting up an automated payment through your bank, which many people prefer, is another option.
You have an HSBC checking account. You just need to log into your account and navigate to the Bill Pay area. Enter the account number and payment address to get your bill.
If your bank keeps the vendor’s electronic payment details, the payment will be made via ACH. This implies it will be paid electronically and will come within a day or two. If your bank doesn’t have your vendor’s electronic payment information, they’ll generate, print, and mail a check to them.
3. Make use of your credit card for automatic payment.
Finally, if you need to pay a bill that accepts cards, you can always enter your credit card information. Consider your cell phone bill as an example.
If possible, everyone should set up automatic payments. With so many elements of our lives becoming digital and mobile, it only makes sense to remove the hassle of knowing when to pay a bill and having to do so manually.