Autopay allows you to pay your bills every month through recurring transfers from your checking account. This automated process helps ensure your bills are paid regularly and on time. You can often use autopay to pay bills for things like your mortgage, utilities or a car loan.

Using autopay may be right for you if you’re tired of having to remember to pay your bills manually each month. It’s easy to set up and can help simplify your money management. Here’s what you need to know if you’re considering using this method of bill payment.

What is autopay?

Autopay is a way of paying a bill automatically each month on an agreed-upon date. Your bank may allow you to schedule these payments through its automatic bill payment feature, or you can set up autopay directly with a vendor (such as your cable company or your gym) by authorizing them to take the payment from your checking account on a recurring basis.

As an alternative to having bill payments debited from your bank account, the payment amount can often be charged to your credit card by a vendor every month.

How autopay works

Automated payments from your checking account are usually processed through the Automated Clearing House (ACH). This nationwide network enables banks to transfer money electronically. With autopay, ACH moves the funds from your checking account to a vendor you’re set up to pay.

When autopay is set up with your checking account, it often works best for bills that are for the same amount each month — or those that don’t vary by much. Knowing exactly how much is going to be debited in advance can help you ensure you’ll have adequate funds in the account.

Such static payments may include:

  • Mortgage payments
  • Auto loan payments
  • Monthly insurance premiums
  • Gym memberships
  • Streaming services

Bills with amounts that can vary significantly each month may be best handled manually. This can give you time to ensure there are adequate funds in your account and allow you to select what date you want to send the payment, accordingly.

Such variable payments may include:

  • Credit card payments
  • Electric or gas bills

How autopay can help with money management

Autopay can be very useful for those who worry about forgetting payments or who procrastinate when it comes to bills. It can simplify money management for anyone who feels overwhelmed by manually paying bills each month for things like a mortgage, student loan, tuition, insurance, utilities and subscription services.

What’s more, paying your bills on time is good for your credit score. Making late payments can bring down your credit score and cause lenders to view you as high risk.

Pros and cons of automatic payments

Whether autopay is right for you depends on your own money management preferences and what types of bills you’re paying.

Pros of autopay

  • Bills won’t be late: Since they’re on a set schedule, your bill payments will be debited on time, so you won’t be hit with late fees.
  • It can help your credit score: Payments for bills such as your mortgage or car loan usually show up on your credit report, and anyone who views this report — such as potential lenders — will see your bills are being paid on time.
  • It saves time: This is especially true for those who have many bills to pay every month. Setting up autopay is a one-time task, and paying the bill won’t require any time going forward.

Cons of autopay

  • Your account can become overdrawn: An automatic payment can put your checking account in the red — which may also result in an overdraft fee — if you forget it will take place and don’t have the funds to cover it.
  • Errors may be overlooked: With autopay in place, you may feel the need to log onto your bank account less frequently — which means you’re less likely to notice if any billing errors take place.
  • Unused subscriptions: Not taking the time to manually pay your bills each month may cause you to go several months without realizing you may be paying for things you no longer use, such as streaming services or gym memberships.

Bottom line

Using autopay can ensure your bills are paid on time each month with less effort than paying them manually. However, it’s still important to log onto your bank account regularly to ensure there are enough funds to cover the bills, as well as to catch any errors or instances of fraud.