One of the most common pieces of financial advice is to find opportunities to automate expenses. It’s recommended to set up automatic bill pay, or autopay, for recurring debts, like credit card statements and student loans.
Discover More: 3 Signs You’ve ‘Made It’ Financially, According to Financial Influencer Genesis Hinckley
Read Next: 7 Wealth-Building Shortcuts Proven To Add $1K to Your Wallet This Month
While autopay can save you time and money, it can also cause problems if you’re not careful. Here are some of the advantages, and the sneaky disadvantages to watch out for, when setting up autopay.
Pro: On-Time Payments
Autopay means your bills are scheduled to be paid automatically, and on time, every month.
Kristin Uptain, marketing manager at Redde Payments, said there are plenty of benefits that come with on-time payments including no more late fees, forgetting to pay bills or writing physical checks. Timely payments are a stress reliever and that’s a great convenience in the life of the everyday consumer.
Check Out: I’m a Financial Advisor — My Wealthiest Clients All Do These 3 Things
Explore More: If You’re Thinking About Getting a CD, Suze Orman Says You Should Do It Now — Here’s Why
Trending Now: Suze Orman’s Secret to a Wealthy Retirement–Have You Made This Money Move?
Con: Potential Overdraft Fees
“If you don’t keep track of when your bills are paid, or if your payment amount exceeds the balance in your checking account when it’s due, you could end up with overdraft or insufficient fund fees on your statement,” Uptain said.
What consumers don’t want is for overdraft fees to become a regular occurrence. Remember that these small fees add up. Don’t ignore them. Regularly check your bank account and budget carefully to ensure you have a reliable amount of money to make these payments.
Try This: 25 Creative Ways To Save Money
Pro: Builds Credit
In addition to ensuring your bills are paid on time each month, automatic bill payments can help you better build your credit history.
“Timely payments are one of the most important factors in calculating your credit score; they account for 35% of your FICO score,” Uptain said.
Uptain recommends viewing it as like getting a gold star for every payment. You’ll always need to make timely payments on your bills, so why not benefit from the payment? Autopay can help you improve your standing with your bank and credit.
Con: Potential Billing Mistakes
Autopay systems are largely reliable, but it is possible for this kind of technology to experience the occasional glitch. For example, you might be double charged for a product or service that was provided to you in error.
Uptain recommends regularly checking in to make sure you’re not accidentally experiencing any incorrect transactions like a higher than normal monthly billing statement. Mistakes like these are usually easy to resolve, as long as you catch them early on.
Con: Potential Identity Theft
What happens if someone steals your credit card or gets access to your checking account information? Identity theft, while a low possibility when it comes to autopay, is still a possible issue.
To help minimize this risk, Uptain recommends setting up automatic payment plans only with companies that have strong security measures in place.
For issues relating to potential credit card theft, Cynthia Flannigan, certified financial planner (CFP) and director of financial planning at MainStreet Financial Planning, said to dedicate a separate credit card to important automatic bill payments like utilities and medical premiums. Use the card specifically for these needs and avoid using it in places like online shopping websites where the sites may be less secure.
For You: 30 Scam Phone Numbers To Block and Area Codes To Avoid
Pro: Good for the Environment
Autopay eliminates additional costs for consumers, like purchasing postage and checks. The elimination of printing costs associated with paper billing is good for businesses, consumers and the environment as a whole.
You can reliably make payments, feel confident that you haven’t forgotten anything and do good by the environment, one automatic bill payment at a time.
More From GOBankingRates
6 Used Luxury SUVs That Are a Good Investment for Retirees
How Middle-Class Earners Are Quietly Becoming Millionaires — and How You Can, Too
7 Overpriced Grocery Items Frugal People Should Quit Buying in 2025
4 Low-Risk Ways To Build Your Savings in 2025
Main Street Financial Planning, “Cynthia Flannigan, CFP®.”
This article originally appeared on GOBankingRates.com: The Pros and Cons of Autopay
