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Autopay vs. Online Bill Pay: Which is Right for You?

When it comes to paying bills, many have moved away from traditional checkbooks in favor of online bill pay or autopay. While both methods are convenient, they operate differently. With online bill pay, your bank sends payments to your creditor from your account. In contrast, autopay allows your creditor to withdraw money directly from your account. Here’s how to decide which method is best for you.

Understanding Autopay and Online Bill Pay

How Autopay Works

Credit card companies, lenders, service providers, and other vendors often offer autopay. To set it up, you provide payment information to the vendor and authorize them to charge you automatically for each bill. Payments can be made directly from your bank account or via a credit card. Sharing your credit card information can be safer than sharing your bank account details, as credit card fraud protection is generally stronger.

When your bill is due, the vendor automatically withdraws the amount from your bank account or charges your credit card. Autopayments recur monthly, allowing you to “set it and forget it.”

How Online Bill Pay Works

Online bill pay is a free service offered by most banks and credit unions. To use it, log in to your bank account online or through the banking app, and add billing information for the companies you plan to pay. You can schedule payments manually or set up recurring payments for the same amount each month. The bank initiates the payment directly from your account to the vendor on the date you choose.

Even companies that don’t accept electronic payments can be paid with online bill pay, as the bank will send a check on your behalf. Payments can generally be scheduled for the next business day or even the same day, though check payments take longer to process.

Comparing Online Bill Pay and Autopay

Pros and Cons of Automatic Bill Payment

Online Bill Pay: Pros

• Manage your bills, check your bank balance, transfer funds, and more all in one place.
• Service providers or creditors don’t have access to your bank account information.
• You control whether to automate recurring payments or schedule them manually each month.
• Even vendors that don’t accept electronic payments can be paid with online bill pay.

Online Bill Pay: Cons

• Recurring payments go through unless you change them, even if you cancel a service or don’t have a bill due that month.
• Recurring payment amounts won’t automatically change if your bill changes; you must adjust them manually.
• Your bank account could become overdrawn if you don’t have enough funds when a payment is due, leading to late fees and non-sufficient fund fees.

Autopay: Pros

• If a bill’s balance changes from one month to another, autopay automatically adjusts to pay the full amount.
• Companies sometimes offer discounts for using autopay.

Autopay: Cons

• Autopay may not be available from all your vendors.
• If you have insufficient funds when the autopay is due, your bill won’t be paid, and both the merchant and the bank may impose fees.
• If the vendor you’re paying isn’t trustworthy, your bank account information could be at risk of fraud.
• Using a credit card for autopay could lead to a high balance unless you pay the credit card bill in full each month.
• Using a credit card for autopay could increase your credit utilization ratio, which can negatively impact your credit score.

How to Choose Between Autopay and Online Bill Pay

To choose the best payment method, weigh the pros and cons and consider which factors matter most to you. Here are some scenarios where one option might be more suitable:

• If your bill amounts vary from month to month, autopay ensures your bills are paid in full without any action on your part.
• If you want to earn credit card rewards, using a rewards credit card to pay bills with autopay can help you accumulate cash back, points, and other perks. Just monitor your credit utilization ratio and pay your balance in full each month.
• If you prefer managing all your bills in one place, online bill pay could be the best option for you.
• If you want to be actively involved in your bill payment process, scheduling online bill pay manually helps streamline your finances without removing you from the process.
• If you’re concerned about data breaches, online bill pay can be safer than autopay due to the encryption, multifactor authentication, and other security measures used by financial institutions.

The Bottom Line

Automating your bill payments via online bill pay or autopay can simplify your financial life and help improve your credit score by ensuring timely payments. However, even after setting up autopay or online bill pay, it’s important to monitor your bank statements, credit card statements, and other financial accounts for potential signs of fraud. Free credit monitoring from Experian can help you stay on top of your finances by alerting you to suspicious activity, changes to your credit utilization, and more.

For any mortgage-related needs, feel free to call O1ne Mortgage at 213-732-3074. We’re here to help you navigate your financial journey with confidence.

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