If you’re like many cardholders, you will likely want to take advantage of any opportunities to streamline your finances. A commonly used credit card feature that can make life more convenient is automated credit card payments, or credit card autopay. It’s a way to have your bill paid seamlessly on time so you don’t have to wonder, “Is my credit card payment due around now? Have I already paid it for this month?”
Understanding what autopay is and how it works can help you decide if enrolling in automatic payments is right for you. There are definite benefits to setting up autopay, but there are downsides to take into account as well. You’ll also need to consider how you’d like to configure credit card autopay, as there are a few different options.
In this guide, you’ll learn about all this topic and gain the insight you need to decide if autopay for your credit card is a good fit for you.
What Is an Automated Credit Card Payment and How Does It Work?
An automated credit card payment, or autopay, is a recurring payment that’s scheduled for the same day each month. The automatic payment is typically made on a date that’s either before or on the statement due date.
Autopay allows cardholders the convenience of making credit card payments on a periodic basis without having to manually set up payments. This also helps with avoiding late or missed payments.
When you enroll in automated credit card payments through your credit card issuer, you’re authorizing the issuer to request a certain payment amount on a specific date from your banking institution. When the autopay date arrives, your card issuer’s bank will send your bank an electronic request for the payment amount you’ve set up.
Your bank then will fulfill the payment request and send it to the merchant’s bank (i.e., your card issuer).
Credit Card Autopay Options
There are a few ways to approach automatic bill payments through your card issuer. Each has its benefits and caveats, so assess your own financial situation before choosing an autopay strategy for your credit card.
Paying the Minimum
One option is establishing automated credit card payments for the minimum amount that’s due on your billing statement. The minimum payment is the smaller amount due that’s shown on your statement or online account, and the amount varies based on your total charges at the close of your card’s billing cycle.
Selecting to pay the minimum can be useful if you don’t have enough money to repay the entire statement in one fell swoop. By paying the minimum, you’ll fulfill the issuer’s minimum requested payment and keep your account in good standing — which, in turn, helps keep your credit score in good standing.
However, this means you’ll roll over the remaining statement balance into the next billing period, which will lead to incurring interest charges. That’s one aspect of how credit cards work.
Recommended: What is a Charge Card?
Paying the Full Balance
You also can choose to pay the full balance as shown on the billing statement for each recurring payment. Paying the full balance is beneficial, because it allows you to avoid rolling a balance into the next billing cycle. This, in turn, means you can avoid interest on a credit card.
However, since your balance will likely vary month to month, you need to be sure you have enough cash in your bank account to cover it. Otherwise, you could wind up overdrafting.
Paying a Fixed Amount
Another option is to set up automated credit card payments for a specific, fixed amount. For example, if you exclusively use your card to pay your fixed monthly cell phone bill of $50, you can establish an autopay for $50 toward your account on a recurring schedule. You can also use this option if you’d like to make extra credit card payments throughout the month.
Benefits of Automatic Credit Card Payments
Choosing a credit card that allows autopay can be helpful for various reasons. These are a few of the major upsides to enrolling in automated credit card payments:
• You won’t risk forgetting about a credit card payment due date.
• You’ll avoid penalty fees and penalty annual percentage rates (APRs) for making a late payment.
• Your positive payment history is maintained.
Drawbacks of Automatic Credit Card Payments
There are also some caveats to consider before you set up autopay. This includes the following:
• You might face other fees if you have insufficient funds when using autopay.
• You might slack on reviewing your monthly credit card statement for red flags.
• You might inadvertently overspend on your card because you feel as if you’ve got the payment covered.
Factors to Consider Before Setting up Automatic Credit Card Payments
Before setting up automated credit card payments, honestly assess your finances and habits. Verify that you have sufficient deposits into your checking or savings account to cover the autopay amount you’ve set up.
And if you do set up automatic credit card payments, make sure you continue to check your monthly billing statements. Confirm that all transactions are yours and are accurate, and that your total spending is still manageable.
Setting up Automatic Credit Card Payments
The exact process for how to set up automatic credit card payments can vary somewhat from issuer to issuer, but in general, it’s pretty easy to do.
• You will need to first log on to your credit card account either online or through the mobile app. It’s also possible to call the number listed on the back of your card to have someone talk you through it.
• Pull up the section labeled payments, and you should then be able to find an option to manage or set up autopay. You’ll need to connect a bank account where the payments will get pulled from and select the date and frequency at which you’d like the payment to occur.
• You should also be able to select which payment option you’d like (minimum due, the full balance, or another amount).
💡 Quick Tip: When using your credit card, make sure you’re spending within your means. Ideally, you won’t charge more to your card in any given month than you can afford to pay off that month.
Tips for Stopping Automatic Payments on Credit Card
What if you have credit card autopay activated on your account but need to halt automated payments moving forward? Federal law protects your right to rescind authorization for automatic payments. Here are a few ways to go about it:
• Turn off autopay through your card issuer. Many credit card issuers give cardholders the ability to turn autopay on or off through the app or via their online account’s payment settings. Just make sure you do so before the next automated payment is processed.
• Revoke authorization from your card issuer. Call your credit card issuer to revoke authorization for autopay. Then follow up the call with a written letter revoking authorization, and requesting a stop to automatic payments on your account.
• Request a stop payment order from your bank. You can also contact your bank to place a stop payment order on any automated payment transactions requested by the card issuer.
Regardless of how you stop automated payments from occurring, continue reviewing your monthly statement and account activity to ensure that the autopay has ceased.
What Happens if You Overpay Your Credit Card Balance?
Let’s say you inadvertently set up autopay to higher than the balance — what could you do then? Typically, credit card overpayments are processed as a negative balance. A credit for the overpaid amount should be reflected on the next billing statement, assuming your new transactions bring your account above a zero balance.
However, you do have the right to request a refund from the card issuer, instead of having it applied as a credit. The Federal Deposit Insurance Corporation (FDIC) has in place regulatory credit card rules for card issuers when it comes to an overpayment on your card account. It states that upon receipt of a consumer’s written refund request for an overpayment, an issuer must provide the refund within seven business days.
The Takeaway
Automated credit card payments are a convenient option and can mean one less thing to remember. In addition to helping you keep your card account in good standing, autopay can provide peace of mind. By automating payments, you’ll more easily avoid credit card late payments, penalty fees, and penalty APRs for late payments.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
Is it a good idea to automate monthly credit card payments?
Whether enrolling in automated credit card payments is a good idea depends on your current financial situation. You must reliably have the payment amount in your checking or savings account each month and not be at risk of overdrawing or having insufficient funds. Also consider your other financial responsibilities and personal money management habits to decide if automated payments are right for you.
Do automatic payments affect your credit score?
Thirty-five percent of your FICO® credit score calculation is based on your payment history. Automatic payments can help you make on-time payments for at least the minimum balance due so your payment history builds or remains positive. As long as the deposit account that automatic payment is drawn from has adequate funds, the credit card autopay transaction can be advantageous to your credit profile.
Do banks charge for automated credit card payments?
No, banks and credit card issuers don’t typically charge an additional fee to make automated credit card payments. Autopay is intended as a payment convenience for cardholders. But ultimately, it helps card issuers and banks better secure repayment from customers, thereby lessening the risk of a late payment or delinquent account.
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