Paying your bills is simple, but sometimes life gets in the way. If you miss a credit card payment or forget to pay the entire statement balance, you’ll incur interest charges.
To avoid this scenario, set up an automatic credit card payment so you’ll always pay on time.
What are automatic credit card payments?
Automatic credit card payments are when your credit card automatically withdraws funds from your chequing or savings account to pay off your credit card balance. In most cases, you can choose to have the monthly minimum payment, a set amount, or the entire balance applied to your credit card.
You don’t have to bank with your credit card provider to set up automatic credit card payments; they can be set up with a chequing or savings account at any financial institution. For example, if you have a TD credit card, you could designate your CIBC chequing account for automatic credit card payments.
Pros of automatic credit card payments
- No interest charges. You’ll never incur interest charges if you set up your automatic credit card payments for the entire balance.
- Builds positive credit history. Your payment history is a major factor in determining your credit score. Since you’ll be paying your entire bill in full and on time, you could see your credit score increase.
- You save time. There’s no need to manually pay your bills every month if you use automatic payments.
- Protection and security. With automatic payments, there’s less risk of identity fraud compared to cheques, which can be lost or stolen in the mail.
Cons of automatic credit card payments
- Overdraw potential. Since automatic credit card payments come from your bank account, there’s always the chance that you could go into overdraft if you don’t have sufficient funds to cover your balance.
- You may miss errors. Automatic payments allow you to focus less on your monthly bills, which means you might miss any mistakes or erroneous charges on your credit card statement.
- It’s harder to track spending. Without a budget, anyone with multiple monthly recurring payments may not notice small increases in their bills. In addition, they may forget about any recurring, annual expenses they no longer need.
- You may run into cash flow problems. Even if you have the money available to pay off your credit card bill, you might need to prioritize that money for something else. You’d have to remember to cancel your automatic payments if you need the cash.
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How to set up automatic credit card payment
Just about every major credit card provider will allow you to set up automatic credit card payments via your online account or mobile app. Check your credit card terms and conditions to make sure it’s possible. Although the menus and steps will be a little different, you would just need to put in the account information, date and how much you want to transfer.
If your credit card issuer does not offer specific instructions, call customer service and ask to set up a pre-authorized debit (PAD) payment.
|Credit card issuer||How to set up credit card autopay|
|American Express||Through American Express Online Services: click “Payments” and then select “Manage Pre-authorized Payment.”|
|Bank of Montreal (BMO)||Via BMO Online Banking: select your credit card under “My account summary,” and select “balance transfer or pre-authorized payment.”|
|Canadian Imperial Bank of Commerce||Sign into CIBC Online Banking, click “Transfers” and follow the steps.|
|Royal Bank of Canada (RBC)||Log into RBC Online Banking and select “Profile & Account Settings”. Go to the debit and credit cards section, and select “Set up automatic payments.”|
|Scotiabank||From the Scotiabank app, tap “Manage” then “AutoPay” and finally select “Set up AutoPay.”|
|Tangerine||Log into Tangerine Bank Online Banking or the Tangerine Mobile Banking app, go to “Transfer Money” and follow the prompts.|
|TD Bank||Complete the “Pre-Authorized Debit (PAD) Agreement” and mail or fax it to TD Canada Trust.|
Besides the above methods, there are a few additional ways to set up automatic credit card payments.
- Transfer funds from another account. If you bank with the same financial institution where your credit card is issued, you can set up recurring money transfers for a fixed amount.
- Add your card as a payee. You can also pay credit card balances if you set up your card as a bill payee at your financial institution. All you would have to do is search your credit card provider’s name under the payee list. The account number would be your credit card number. You can then set up recurring payments.
While these two methods add convenience, you may only be able to set up transfers for a fixed amount. So you may be unable to choose an amount that varies every month, like the minimum or entire balance owed on your credit card, as the payment.
How to stop automatic credit card payments
If you ever need to stop your automatic credit card payments, you would generally be able to go online and navigate to where your pre-authorized credit card payments are being managed. You could then cancel or change the payments.
What to watch out for after setting up automatic credit card payments
- Overdraft fees. Automatic credit card payments are only effective if you always have enough money in your bank account to pay off your balance each month. If you don’t have enough funds available, the non-sufficient funds (NSF) fee could easily cost you $40 or more. Even if you have the funds available, it may drop you below the minimum balance requirement to waive your monthly account fees. That means you’ll be charged a fee for your account for the month.
- Errors and fraud. Even though your payments are made each month automatically, you should still check every statement for any errors or signs of credit card fraud. If anything looks suspicious, contact your credit card provider to open an investigation immediately.
- Alternatives. If you don’t want to set up automatic payments but also don’t want to miss payments, you could set up calendar reminders instead. As soon as you get a payment alert, pay off your full balance to avoid interest charges.