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What are automated bill payments?

Missing a bill payment can be a source of stress for anyone and lead to extra fees no-one wants to face. Automatic bill paying can completely remove the element of human error that comes with every deadline. Instead, on a set date, automatic payment is taken from your account and sent to your biller. That’s it, easy payment without you having to lift a finger.

How does automatic bill paying work?

Automated bill payment can be set up from your checking account. Depending on your bank, you can do this online, in person, or on the phone. Alternatively, you can set up automatic bill paying using a credit card, which can be arranged with your creditor.

If you pay by credit card, then automated bill payments will be a charge that appears on your account every month, for example, $50 withdrawn on the 18th every month for a gym membership. If you pay through your checking account, it’s made via the Automated Clearing House (ACH), an electronic payment method that transfers money. Your salary, for example, is most likely sent through ACH.

You can also directly approach the vendor who is asking you for payment, and they will set up an automatic payment for you to be billed monthly. You should have the option to pay earlier than the due date, which is a good idea as it allows you to transfer money over (if you find you are short one month) before being hit with late fees.

Why you should use automated bill payments

There are plenty of positives to automatic bill payments, the most obvious being that you’ll never miss a payment again, but there are other advantages too:

  • It can improve your credit score by ensuring your payments are always on time

  • It’s secure and convenient – you won’t need to input your card details every time you need to pay

  • If you concentrate all your bills from a single account, it makes personal admin much more organized

  • It encourages better money management – once the payment is gone, you’ll have a better understanding of your true level of disposable income without a “to be paid” cost in your head

While these are all great reasons to use automatic bill payments and improve your personal admin, there are some downsides. For example, you may bite into your overdraft if your payments are for irregular amounts. A gym membership is $50 all year round, but energy is generally higher in winter. If your personal budgeting can’t easily bounce back against a sudden change of $50-100 in this month’s bill, you might not want to set it to automatically leave your account when you have other priorities.

Your money will also leave your account regardless of whether the amount requested is correct or not. We’ve all experienced being overcharged for something, say an extra drink on a bar receipt, which is then rectified before you pay. With automated bill payments, you don’t have the opportunity to review the bill before you pay it, instead, you will have to make a claim to get your money back, which can be time-consuming and stressful.

There is also the risk that comes with “out of sight, out of mind” – if you stop being hands-on with your payments you may forget precisely what you’re being billed for. It’s easy enough to do. For example, maybe you see a great deal on a new gym, so you sign up immediately and make a mental note to cancel your current membership and its automatic bill paying schedule. But then life happens, and you just never get around to it. Regardless of whether you are still using your membership or not, payment will still be leaving your account until you make the effort to cancel it. So, if you have a habit of changing your services and memberships on a regular basis, automatic payment may just end up being overly complicated.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.

GoCardless is used by over 55,000 businesses around the world. Learn more about how you can improve payment processing at your business today.

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