Ever wonder if automating your payments for bills and loans would save you time, money and increase you credit score?
Most of us are deluged with monthly bills: water, gas, electricity, auto loans, credit cards, mortgage, cell phones, cable … it’s a long list. Add in the fact that these bills have different due dates, often odd ones that don’t conform to the usual 1st and 15th of the month cycles, and it’s easy to miss one in the shuffle. In between getting the kids to and from school, work obligations and the occasional social evening, slipping up on a payment is almost a foregone conclusion.
Late Payments Are A Killer
Late payments are bad. First, you’re almost certainly going to incur fees for a past due payment. In the case of credit cards, a late payment can cause you to lose benefits, like zero interest on balance transfers, or even trigger a “penalty interest rate.” And you might have to pay that higher rate until you’ve made a number of on-time payments in a row. Worse, late payments can lower your credit score. Payment history comprises 35 percent of your FICO score. In fact, it’s the largest factor that FICO takes into account when making its calculation. Your FICO score affects your ability to get credit and the interest rates you’re offered — higher FICO scores can qualify you for lower rates, saving you money.
How To Avoid Late Payments
Option 1: Automated Bill Pay
There’s a simple way to save money by avoiding late payments — using an automated bill payment system. Auto-pay systems come in several flavors, though whichever one you choose can save you money, time and worry. Many banks offer these services through their online banking systems. You can create accounts for the bills that need to be paid and then schedule the payments. For payments with changing amounts, you’ll need to manually set the amount each month. For recurring bills, most services will let you schedule the payments up to a year in advance. Typically, you can change the date of a payment or cancel it altogether up to the day set for payment. These services take the money directly from your checking account and transmit it to the payee. For payees that don’t accept wire transfers, the bank will mail a check.
Option 2: Automatic Withdrawal
Another option is to check the websites of the companies and organizations you pay. Many will allow you to register your bank account with them and they will debit your account automatically when your bill is due. The advantage here is that you don’t have to enter amounts for variable charges like utilities and credit cards. The downside is that you have no control over the payments. If a biller takes more from your account than the amount due — by double billing one month, for example — it can be a headache to get the error corrected. And, while you’re getting it corrected, you don’t have the use of that money.
Option 3: Auto-pay Service
A third option is to find out if one of your credit card issuers offers an auto-pay service. These vary greatly, but in general they work a lot like a bank’s auto-pay system. If you pay bills through your credit card, you may earn rewards on the amounts charged. Issuer agreements with the payees often give them the right to retract payments that are in dispute. However, if the total amount of your monthly bills is close to the credit limit on your card, you may risk going over the card’s limit, potentially resulting in penalties from the card company. Also, if your credit card charges interest on new purchases from the date incurred, or if you don’t pay the credit card in full each month, you’ll rack up interest charges on basic living expenses. That’s a bad idea.
Option 4: Dedicated Auto-Payment System
The fourth option is to use a dedicated auto-payment system. AutoPayPlus can automate your monthly bill payments while also helping you save money by paying off your home mortgage and other loans faster. With AutoPayPlus, you register your bills with APP for automatic payment on the date you specify each month. You’ll avoid overcharges, without the need to give access to your bank account, debit card or credit card accounts to your creditors. APP takes the hassle out of payments and protects your accounts with robust online security. AutoPayPlus also comes with a guarantee that we will pay your bills on time as you specify or we’ll pay any late fees or finance charges reasonably incurred on any account in good standing prior to the incident (read all the details about our PaymentPlus Guarantee).
And with AutoPayPlus, you can pay down many of your debts on a biweekly schedule to get out of debt faster and save on costly interest payments. You can monitor your progress on all your bills in one place, and that can make sticking to a budget easier. Save time, save money and protect your credit.
Has automatic bill payment helped you? Tell us about it!