Banking online has become mainstream. In fact, one 2010 survey, by Fiserv, Inc., a financial services tech company, found that 80 percent of all households with Internet access use online banking. Paying bills online is less pervasive, however, the survey found—just 40 percent of survey respondents pay bills online.
Auto pay is good for budgeting because it allows you to decide when the money will leave your account.
Although the survey doesn’t directly address it, it’s probably a logical assumption that the percentage of people who set up automatic bill pay is even less. Yet there are big advantages to managing your finances by paying bills automatically every month, including what the process can do to help protect your credit score.
Automatic bill pay is a great way to ensure you never forget a recurring expense that is the same every month, such as your cable bill, rent or mortgage. After the initial set-up, you don’t have to do anything ever again to ensure the bill gets paid every month. Since reliable payment history is an important element of your overall credit rating and score, anything that ensures payments are never late or missed is a good thing.
Auto pay is also a good budgeting tool because it allows you to decide when during the month money will go out of your account.
If you bank online, you probably already have access to automatic bill pay through your bank. Log on to your account and check it out. Most systems are pretty easy to understand and will give you clear direction on how to set up auto payments. Or, call your bank and ask for help walking through the process.
Many vendors, from cable and cell service providers to credit card companies, now also allow you to establish automatic payment through your online account with them. As with your bank, these systems are pretty easy to understand and set up. Keep in mind, however, that you’ll need to give the vendor your bank account information, so if that’s a concern, you might prefer to set up auto pay through your bank.
One important caveat: Using automatic bill pay does not give you a pass to skip looking at that bill—or your bank statement—every month. It’s not a perfect world, and mistakes or accidents can happen. You still need to check your bill every month to ensure no unexpected charge has appeared and that the expense is still the same. And you need to check your bank statement every month to ensure the money has really gone out of your account as planned.
Automatic bill pay can be one more smart tool you use to manage your finances and protect your credit score.