Credit Cards

4 reasons to automate your credit card payments

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This simple step can have several important benefits.

Key points

  • Automating credit card payments can help you avoid the financial consequences of a late payment.
  • It can also simplify money management.
  • Automating payments can even help you avoid interest charges.

I have a few different credit cards that I use for different purposes, but each card has one thing in common. I have set up automatic payments so my card balance is paid in full each month.

Whether you have one card or 20, you may want to do the same. In fact, there are four good reasons why it can make a lot of sense to make sure your card payment is made automatically from your bank account every month.

1. You can avoid late fees

Many credit card companies charge you a fee if you miss a payment. This can easily happen if you haven’t automated the process, as sometimes life gets busy and you forget.

If you’ve made the process automatic, your payment will always get where it’s supposed to go on time so you don’t have to worry about incurring extra costs due to forgetfulness. If you’re trying to manage multiple credit cards (perhaps to maximize the rewards you can earn), then it’s even more likely that a payment from one will end up going unnoticed, so the benefits of automation can be even greater.

2. You can protect your credit score

A late payment on a credit card will generally be reported to the three major credit bureaus if it is at least 30 days past due. This can do serious long-term damage to your credit score, as a late payment stays on your report for years, and payment history is the most important factor when your score is calculated.

By setting up automatic payments, you’ll make sure your card issuer gets your money on time every month so you don’t end up with a black mark on your credit history. Building a perfect history of paying on time is one of the best ways to get a great credit score that opens the door to affordable loans on other larger loans, like a mortgage.

3. You can make sure your card is paid in full

You usually have a choice when you set up automatic payments. You can make arrangements to make the minimum payment due, pay a fixed amount, or pay off the balance in full.

Ideally, you’ll choose to automatically pay the full amount due each month. This will ensure that you don’t end up with a credit card balance that comes with costly interest charges. Of course, you should do this only if you are sure that you will always have the money in your bank account to make the full payment. Otherwise, you could be stuck with overdraft fees that also hurt your finances.

Even if you can’t pay your balance in full, you can still set up automatic payments for more than the minimum by arranging to pay a higher fixed amount. For example, if your minimum payment is $55 but you’ve created a debt settlement plan that allows you to pay $100, you can automate your $100 payment each month to ensure you stick to your plan. By paying more, you can make more progress toward paying off your loan more quickly.

4. You can simplify your financial life

Finally, by setting up automatic payments, you can cross this task off your to-do list and you won’t have to worry about sending your payment each month. Automating as much of your financial life as possible, including credit card payments and savings, can free up your time for other things that are more fun.

For each of these reasons, you should seriously consider setting up automatic payments on your cards as soon as possible if you haven’t already done so.

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