Setting up automatic payments for your credit card and other bills can be a convenient way to ensure timely payment and avoid late fees. However, there are trade-offs to consider. For instance, autopay could result in accidentally paying a bill with errors or incurring overdraft fees if the associated checking or savings account lacks sufficient funds.
According to Ted Rossman, senior credit card analyst at Bankrate, setting it and forgetting it can sometimes lead to overspending. To help you decide whether to set bills to autopay or make manual payments, experts have highlighted the pros and cons.
Avoiding late fees
One major advantage of autopay is that it helps avoid late fees. By eliminating the risk of forgetting to pay on time, autopayments contribute to maintaining a good credit score. However, it is still recommended to periodically check your account to ensure payments have been processed correctly and to address any technical issues or expired cards that could result in late fees.
Time saver
Automating bill payments can save you the hassle of managing multiple due dates and the stress of potentially missing payments. It is also a time-saving measure as it eliminates the need to log in to various accounts and manually make payments each month.
Autopayments are particularly suitable for fixed-rate bills that remain consistent each month. However, it is still important to periodically check for any unexpected charges, surcharges, or fee increases.
Not safe for credit cards
Credit card bills can fluctuate significantly based on your spending, and with high interest rates, it is crucial to pay off the entire balance each month. Failure to review your credit card statement monthly could result in paying for incorrect or fraudulent charges that are more challenging to dispute once payment has been made.
Fixed-rate bills
Bills like rent, mortgage, internet, cable, gym memberships, and subscriptions with consistent amounts are generally safe for autopay. However, it is recommended to remain aware of potential price hikes that businesses may implement at any time.
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