Money & The Economy

How to Set Up an Automatic Payment Plan

Creditors, especially banks and credit card issuers, are unbelievably sensitive to whether you pay your bills on time. So is your credit score. One slip-up could cost you dearly if that means you lose your low- or no-interest rate, or a late payment results in a big late fee.

Late payments when reported to the credit bureaus can mean a serious blow to your credit score, which may result in higher insurance premiums now and higher interest rates on your next mortgage. If you’re thinking “domino effect,” you are exactly right. Bottom line: Do not pay late!

An excellent way to make sure you always pay on time — even when you’re on vacation, sick or for some other reason suffer from brain freeze when it’s time to pay bills — is to automate. By putting as many of your payments on auto-pay as you can, you eliminate that monthly decision: Should I pay bills tonight or wait until Tuesday? Should I put money into savings this month or buy those cute shoes?

For me, I know that the fewer financial decisions I have to make on a daily basis, the better. That’s why I love automatic payments.

There are several ways to do this, but all result in the same thing: Your finances are set to “autopilot” while you are off enjoying life.

You can set up automatic payments two ways:

ONLINE BILL PAY. Use your bank’s online bill pay option (a free service at most banks and credit unions) to set up your plan so that money is automatically transferred by your bank out of your account and sent directly to the payees you designate. Just make sure that with your credit-card accounts, the amount you stipulate to be paid automatically is at least enough to satisfy the minimum payment requirement. Banks don’t all operate exactly the same way, so go online to check out your bank’s auto-pay service.

AUTOMATIC AUTHORIZED PAYMENTS. Most lenders and other service providers will let you set up online automatic payments authorizing them to reach into your bank account to take an amount you specify — the minimum payment, a set dollar amount or the full balance — every month from your checking account right before the payment is due. Go to your credit-card issuer’s and other lenders’ websites to learn more. Most utility companies now offer this kind of service, too. And while we’re talking about it, if you set up your student loans to be paid automatically, expect to get a reduction in your interest rate as a nice thank you. Check it out.

I once flew in a chartered jet (not exactly like a rock star, but I did feel quite pampered) and nearly freaked out when the pilot stood up, left his pilot seat and came back to chat with his three passengers over snacks and sodas. The plane did just fine for nearly a full hour. In no time, I relaxed and enjoyed the company and the ride.

Relying on autopilot in both flying and finances is a quite an amazing thing.

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Mary Hunt

Mary invites you to visit her at, where this column is archived complete with links and resources for all recommended products and services. Mary invites questions and comments at, "Ask Mary." Tips can be submitted at . This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of, a frugal living blog, and the author of the book "Debt-Proof Living."

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