Published on October 28th, 2020 | by Sunit Nandi0
4 Advantages to Automatic Bill Payment
If you are looking for ways to set up a budget and streamline your bill-paying process, automatic bill payment might be a good place to start.
What is automatic bill payment? It’s a system that allows a company to withdraw the amount of a bill from your account or credit card on a regular basis with an up-front authorization from you. You won’t need to actively mail in a payment each week or month; the payment will be made automatically.
Besides helping you save time and budget your money, electronic bill payments can help you reach your financial goals. Here are four advantages of automatic payment.
Keeps Your Credit Score Healthy
The largest contributing factor to your credit score is your ability to pay bills on time. Payment history comprises 35% of your score, making it a major factor in its calculation. By setting up automatic payments for utility billing services, mortgage payments, credit cards and other regularly occurring bills, you will make sure you meet your deadlines. Improving your credit score also means that lenders and credit card companies will be more likely to offer you lower interest rates, thus saving you money in the long run.
Do you want to reduce your paper trail? Most auto-pay transactions are online, letting you skip the check, envelope and paper statements that would go in your filing cabinet. You won’t have to worry about a paper bill getting lost in the daily pile of direct mail. Also, if you are out of town, you will have the reassurance of knowing your bills will be paid, even if you’re not home to get a statement in the mail.
Switching from mailed statements to automatic billing has the extra benefit of helping the environment, so you can do your part in going green as you simplify your payment system.
Makes Goal-Setting Easier
If you are trying to pay off debt on loans or credit cards, setting up automatic payments for them will help you keep your goals. Rather than just making the minimum payment each month, try setting a higher automatic payment amount so you can pay off the debt faster.
As you decide what bills to set up for auto-pay, don’t forget to pay yourself. Automatic transfers to a savings account can be the key to saving money on a regular basis. Consider setting up transfers on the same schedule as your paycheck direct deposit. If your company offers the ability to split direct deposit paychecks between accounts, you may choose to put a percentage of each paycheck directly into a savings account. Doing so will simplify your savings process even more, and you may find that you don’t miss the money you saved because you won’t see it in your checking account.
Potentially Saves Money
You may realize that electronic payments save you money by avoiding late fees and eliminating the need to use stamps or checks to pay bills. Automatic bill payment can also save you money in other ways, though. Lenders may offer bonuses to individuals who set up auto-pay services. For example, some phone companies give auto-pay customers bill credits or extra data. Student loan providers may offer a small interest rate discount for those who set up recurring payments. Some car insurance providers also offer auto-pay discounts, which could range from $40 to $100 annually. The extra money can go into your savings account, creating a painless way to save extra cash each month.
Automatic bill payments can help you pay debts on time with minimal effort on your part. Start with just a few bills and see how the system works for you. Check companies’ policies to see if you can discontinue automatic payments if needed. Monitor your cash flow, check bills for changes or errors and make sure due dates align well with your paychecks. After a few months, if you find electronic payments are going well, you can set up more bills for automatic payment.