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The Ultimate Guide to Automatic Bill Payments

Autopay is a safe and easy way to ensure your bills are paid on time. But it’s not always the best.

Person holding cell phone and credit card over a notebook. (Image credit: Westend61)

Setting up automatic bill payments can help ensure your bills are paid on time. And it’s usually pretty easy to set up between the company and your bank. But there are a few risks.  

Before you set up bill payments or automatic debit transactions, you’ll need to make sure you’re monitoring the money going in and out of your account. Though automatic bill payments can be convenient, they can lead to overdrafts, nonsufficient-funds fees and fraud if you’re not careful.

Below, we’ll dive into how automatic bill payments work and how to help you decide if you should use them in the future. 

What are automatic bill payments?

An automatic bill payment, also referred to as autopay, is one way you can pay a recurring bill. A few examples include:

  • Credit cards
  • Day care or gym membership
  • Loans 
  • Recurring subscriptions 
  • Utilities 

Automatic bill pay is straightforward: Money is withdrawn from your account to pay an outstanding balance or fee on the date you choose. 

For instance, you can schedule to pay your cell phone bill from your checking account to your provider on the 15th of each month. On this day, the bill will be paid without any additional action on your end -- as long as you have sufficient funds in your account. This way, you won’t have to worry about forgetting a due date or making a late payment.

How do automatic bill payments work?

There are two common ways that you can schedule your bills to automatically withdraw from your account. The company can withdraw the payment from your bank account, or you can give your bank permission to pay the bill on a certain date.

How to set up automatic payments through a company or service

You can use an automatic debit payment that allows a company to withdraw the money from your bank account for either one-time or recurring payments. The business will request your bank account information and have you consent to the withdrawal. 

The steps for setting up automatic bill pay will vary from company to company. Generally, you’ll log into your account with the business, such as your electrical company account. Then, you’ll schedule a withdrawal for the outstanding amount from your bank account. With automatic debit payments, it’s best to verify that you’re sending money to the company you owe to avoid scams, fraud and identity theft. Always go through official channels or your online account portal with the company. 

Some companies offer a discount on the bill or interest rate if you schedule automatic payments. This is most common among loan products, such as home equity loans or personal loans, but you can always ask your lender or service provider whether they have any autopay discounts. 

How to set up automatic bill payments through your bank

Another way to automate bill payments is to use your bank’s bill pay option. This way, the bank will withdraw money from your bank account to pay the companies you owe. You’ll need to log into your bank account to enter how much you want to pay, where the funds will go and when to make the payment. 

The steps to setting up automatic bill payments through your bank are straightforward. Before we begin, you’ll need a list of the bills you plan to schedule, the company account numbers and an online bank account. 

  • Start by logging into your online account. Select the “Bill Pay” option. Your bank should have a button worded similarly. 
  • Enter the company name of the payee. Some banks autopopulate this information to select from a list. 
  • Add the company’s account number. You can find this on your printed bill statement. 
  • Select which account you want to withdraw the money from, such as your checking account. 
  • Enter how much you want to pay and when you want to pay the bill. You may also be able to schedule when you want to make a payment -- whether weekly, biweekly or monthly. It’s a good idea to schedule your payment date for a few days before your due date to avoid missing a payment because of unexpected delays in the transfer process.

Bills you can pay with automatic payments

Some bills -- like predictable monthly expenses -- are ideal for bill pay or automatic debit transactions. For example, a gym membership, day care or cell phone bill may be good options for automatic payments.

When you set up automatic bill pay, keep an eye on your account. Some payment amounts may fluctuate and you may need to account for a different amount in your budget. For example, your electricity bill and credit card bill may cost more from month to month, which may come as a surprise. 

If you consistently have a low balance in your bank account or are living paycheck to paycheck, you might be better off paying those bills manually to avoid overdrafting your account from an unexpectedly high bill. But if you have stable income, keep track of your spending and have enough of a cash buffer in your bank account, the conveniences of automatic payments might outweigh the relatively low risks in this case. 

For any payment that you schedule, be sure to set a reminder to keep track of what’s been paid and how much is in your account. Most importantly, make sure there’s enough money in your account to cover recurring bills. If you know a particular bill will be larger than normal -- such as if you’ve charged an expensive purchase to your credit card -- you can always go into your account and manually pay off that bill before the due date instead of relying on autopay. 

Some companies won’t give you the option to set up automatic payments or will offer you more limited options compared to manual payments. For example, your utility company may only allow automatic payments through ACH transfer, but you may be able to pay your bill manually via cash, credit or debit credit card, or by mailing a check. In cases like these, you’ll need to decide whether the conveniences of autopay outweigh the drawbacks of not being able to use your preferred payment method.

Read more: What Is Overdraft Protection and Do You Need It?

Pros and cons of automatic payments

Automatic payments can be a convenient way to make sure your payment arrives on time. However, there are a few downsides to consider -- like nonsufficient-funds or overdraft fees. Here are a few pros and cons.


  • Convenience and less worry about forgetting to make payment 

  • Your payment will be on-time 

  • Avoid late fees and penalties 

  • Can help improve your credit


  • You may unexpectedly overdraft your account, causing you to miss a payment or pay nonsufficient-funds fees

  • Difficulty stopping scheduled automatic payments

  • Risk of undetected fraud charges

  • Potentially less awareness of your expenses if you hold a “set it and forget it” attitude

Should you set up automatic payments?

Whether or not you set up automatic payments will depend on your circumstances.

The main reason you’ll want to avoid setting up automatic payments is the risk of overdrafting and having to pay nonsufficient-funds fees. If your income is unstable or your expenses change from month to month, you may want to manually make your payments when you have more money coming in that month. You should also steer away from scheduling bill payments if you don’t consistently have enough money in your checking or savings account to cover any surprises that can add up that may lead to overdrafting your account. 

But if your bills don’t change much monthly or if you have enough of a buffer in your bank account to cover any unexpected expenses, you may benefit from scheduling automatic payments ahead of time so you don’t need to worry about forgetting a payment. Making on-time payments can boost your credit score and establish a good relationship with your lender or service provider. Even if you set up autopay, it’s still a good idea to look through your bills each month to understand your spending and spot any billing errors or fraud. 

Some companies won’t give you the option to set up automatic payments or will offer you more limited options compared to manual payments. For example, your utility company may only allow automatic payments through ACH.

Read more: How to Set Up Autopay for Your Credit Cards


Some loans offer an interest rate discount if you schedule your payment -- such as student loans, personal loans and home equity loans. Some service providers, such as cell phone or utility companies, may also offer a discount. If you’re curious about whether you’ll get a discount on an automatic debit transaction or bill pay, ask the company.

If you want to unenroll from automatic payments for a recurring bill or cancel an upcoming payment before it’s been sent out, it’s typically easy to do so by either contacting the company or managing your preferences from your online account. Keep in mind that depending on when you try to cancel and what your scheduled payment date is, you may not be able to stop an automatic payment that’s already in process. 

The best way to pay your bills depends on the type of bill, the options available to you and the fees for each option. If you can pay a bill with a credit card without paying a fee and you can pay off the balance before the due date, doing so can let you earn cash-back and rewards. On the other hand, if you can’t pay with a credit card -- such as in the case of most loans -- or if doing so will incur fees that outweigh the rewards, you’ll most likely be better off with an ACH payment from your bank account. If you don’t have a bank account, some service providers and lenders may allow you to pay your bill in-person with cash or by mailing a check or money order.

Companies that allow automatic payments typically allow ACH for autopay and sometimes allow credit cards for autopay. You generally can’t set up autopay if you’re paying your bill in-person or by mail. Automatic bill payments make it easier to pay your bills, but you risk overdraft fees and declined payments if you don’t have enough money in your bank account.

The bottom line

For ease and convenience, you may want to try automatic bill payments. If you’re worried about overdrafting your account for a specific bill or you need to change your scheduled payment date, you can typically cancel or skip a future automatic payment before it’s been sent out by contacting your lender or service provider or through your online account. Just make sure to manually pay the bill before the due date to avoid late fees and penalties.

Dashia writes for CNET. In the past, she wrote for several industries, including FinTech, home security, automation, and more. She loves baking bundt cakes and her favorite flavor is white chocolate raspberry.