Credit card bill autopay: Tips for getting it right

If you ever got hit with a late fee and credit score damage because a due date slipped your mind or you just got busy, you might want to consider setting up automatic bill and credit card payments.

Autopay can help streamline your finances, especially when you are being distracted by other events going on in your life, says Patty Cathey, founder of Smart Retirement, a financial planning company.

“Automatic payments are a very useful tool,” she says.

What is credit card autopay?

Autopay is an easy way to pay your credit card bill. You set it up by signing into your account online and authorizing the card company to debit your payment from your bank account on a set date each month.

All major credit card companies, including American Express, Bank of America, Capital One, Chase and Discover, offer this bill pay option.

Pros of using autopay

But is autopay a good idea? There are pros and cons to relying on automatic payments to get your credit card bill paid on time each month. In general, autopay is a good idea and can even help you build or maintain a good credit score if you use it wisely and review your arrangements regularly.

The biggest benefit of credit card autopay is that it can help you avoid late payments, which can cause you to get hit with both a hefty late fee and a higher penalty interest rate, Cathey says. Those late payments also end up on your credit reports and can have a significant impact on your credit, since payment history is the most important factor in your credit score,

Another plus is that paying automatically saves you time and effort, says Nick Clements, founder of MagnifyMoney.com, a personal finance site.

Cons of using autopay

However, autopay can have its downsides. First, you give up some control of your account to the credit card issuer. Also, autopay makes it easy to become lax about managing your accounts if you “set it and forget it,” Clements says.

If you’ve already got autopay set up and you’re one of many Americans experiencing financial stress due to the coronavirus pandemic, make sure to review your autopay arrangements.

If you can no longer pay the amount you had set, you may want to turn off autopay temporarily or lower your payment amount. If you can’t make the minimum payment, contact your credit card issuer to ask for help. Most issuers have set up credit card coronavirus relief options to help cardholders struggling financially due to the pandemic.

If you haven’t yet set up autopay and want to do so, read on to learn how autopay works and how to use it wisely.

How to set up autopay: 3 options

How do you set up credit card autopay? It’s easy. Simply log in to your account, click on the payments tab and choose the option to set up automatic or recurring payments.

You get to choose the amount you pay each month as long as you make at least the minimum payment. Credit card companies typically offer some combination of these three autopay options:

1. Pay the minimum due

Setting an automatic payment of at least the minimum amount due is a good safety measure if you worry you might forget to pay a bill but are leery of having the total balance due automatically deducted from your bank account, says Craig Roper, senior vice president and chief deposit officer for Bank of Utah.

The downside is rolling over a large balance and failing to supplement those small automatic minimum payments. Without regular additional payments, “You could end up in debt for 25 years and pay ridiculous amounts of interest,” Clements says.

2. Pay the full balance

Setting automatic payments for the full balance is the best choice if you use your card for routine spending to rack up rewards, Clements says.

If you go this route, it’s smart to make sure your bank account is flush so an extra purchase or debit transaction on the wrong day doesn’t trigger overdraft charges, which could also include a return payment fee from your card company, Roper says.

And, if you think there’s a chance you’ll ever use a credit card to finance an emergency purchase that you’ll want to pay off over time, carry a second card that has a low interest rate just for that purpose, Clements says. On that card, you could set up autopay for only the minimum payment.

That way, you’ll avoid a scenario where you charge, for example, a pricey new fridge, forget you have autopay set for the whole balance, then get a nasty surprise when the total gets deducted from your bank account.

3. Pay a fixed amount

Setting a recurring payment of a fixed amount larger than your minimum payment can be a good strategy if you’ve racked up a balance, stopped making purchases on that card and are working on paying down the debt, Clements says.

Having a set amount come out of your account automatically each month “can really help you get that debt paid down,” he says.

If you prefer to have more control over the payment, you could accomplish the same goal by using online bill pay through the bank where you have your checking account, Roper says.

But if you go that route, there’s a small chance you could experience a delay or glitch because your bank, rather than your credit card issuer, is initiating the transaction, he says.

To make sure the minimum gets paid on time, you could set up autopay for the minimum payment through your credit card issuer and set up an additional recurring payment of a set monthly amount through your bank, Clements says.

Tips to make autopay work for you

If the pros of autopay outweigh the cons for you, use these tips to avoid glitches and surprises:

Read the fine print

Yeah, we know you’re used to blowing past the terms and conditions and jumping straight into the process. Don’t do it this time. Read the autopay terms and conditions, which should pop up when you’re signing up, for details on how the process works.

Choose the date your payment will be deducted

Consider your spending and income habits when setting up your due date. If the monthly payment is coming out of a checking account, it can have peaks and valleys as paychecks come and go. Aim for a peak. Many card issuers will adjust your due date, so you may be able to time them together.

Decide what to pay

Have a strategy based on your goals and your habits. Review the last several credit card bills. What’s the most you’ve spent in a month? Use our minimum payment calculator to see what the payment for that amount would be, and make sure that amount will always be available.

Then, decide what you’re trying to do. If you’re just forgetful or busy and money is tight, you want to use automatic payments as a backstop, so just do the minimum payment. If you’re rolling over debt, set it to pay a fixed amount as high as you can afford.

And if your card spending is never high enough to put a dent in your bank account, set it to pay the full amount.

Learn what happens if you add a manual payment

In general, if you’ve got autopay set to pay only the minimum and you pay that amount or more manually before the automatic payment processing date, the autopay won’t go through. The same holds true if you have a recurring payment set for your full balance, and you pay it early.

“You shouldn’t have to worry about double-dipping,” Clements says.

Check with your bank to be sure.

Set up alerts

It’s a good idea to pair autopay with alerts to help you keep an eye on your account.

Consider setting up an alert to let you know any time a charge is made that’s over a certain amount, say $200 or whatever is the maximum you normally spend, so you can dispute a fraudulent charge and have it taken off your bill before any automatic payment is made, Clements recommends.

Also, set an alert to remind you when a payment is due and another to let you know when it posts, he says. As a backup, mark the due date in your digital or paper calendars.

Always scour your statements

Don’t use automatic payments as an excuse to check out of actively managing your finances.

Even if you have alerts set up, it’s still crucial to review your statement every month to make sure everything looks OK before your automatic payment processes, Clements says.

It’s also a good idea to set an alert on your calendar to review your automatic payments regularly. And make sure to revisit your autopay arrangements any time your financial situation changes – for example, if you lose your job or experience a sudden change in income as so many Americans have recently due to COVID-19. If you’ve got autopay set to pay the full balance of your card, you may need to temporarily switch to paying a lower amount as an emergency stopgap measure.

Taking these steps will allow you to avoid the “set it and forget” it approach that can cause autopay to backfire.

“You can enjoy the convenience of autopay but still take responsibility for your account,” Clements says.

Bottom line

Setting up autopay to handle your monthly credit card statements is simple, and it’s available with most major issuers. Whether you want to cover the minimum payment to avoid missing it altogether or you’re simply looking for some added convenience so you don’t have to manually pay the balance in full each month, make sure you continue to monitor your accounts to avoid slipping into debt or missing fraudulent charges.