Credit cards are one of the most convenient instruments for payment. Their utility goes beyond convenience, in the sense that credit cards also help in numerous other ways, such as bringing in offers on various categories of spending like entertainment, transport, dining, etc. As useful and convenient the credit cards are, they turn into financial destructors when outstanding bills are not paid on time.
Additional Reading: How credit card debts can prove risky?
How to set up an auto-debit facility for credit card bills?
The benefits of setting up an auto-debit feature for your credit card bill seems to weigh more than the disadvantages. Let us now look at the ways through which you can set up an auto-debit facility.
Each credit card issuer/bank has its procedure for registering for an auto-debit facility.
There are 2 broad ways of registering for the auto-debit facility
1) Through Your Credit Card Issuer: You can set up an auto-debit facility through your credit card issuer. To enable the auto-debit facility, you would need to download the NACH (National Automated Clearing House) form, fill in all the details and submit the same to your card issuer along with a cancelled cheque leaf. While filling this form you can choose your option for payment among the ones listed above, i.e. the full amount, the minimum amount due or a fixed amount.
2) Through the Internet Banking Facility from Your Bank: Another way you can set up an auto-debit instruction is through the internet banking channel. You can log on to your account and select your credit card issuer like any other regular biller and set up an auto-pay instruction.
What are the important points to note on credit card bills?
Here are a few pointers that you should keep in mind when it concerns the credit card outstanding bill
- A credit card bill comes with two figures on the outstanding column: one is the total amount outstanding and the other is the minimum amount due
- The outstanding figure has to be paid in full for each billing cycle, i.e. the total amount outstanding is the figure to be paid, not the minimum amount due
- By paying only the minimum amount due, you can avoid paying only the late payment fee, however, interest is still payable on the remaining amount
- Credit card debt is the most expensive debt to own. Don't be carried away with the small interest rates of 3-4% shown on the terms and conditions of the credit card. It is 3-4% per month which works up to 36-48% interest over 1 year
- Once you do not pay the full amount, any further spending on your credit card also amasses interest even though it is not past the due date
Considering these points, it is good to ensure that your credit card outstanding bills are paid well before the due date. One of the easiest ways to ensure that your bills are paid on time is by setting up automatic debit for your outstanding figure each month. When you set this up, the amount payable gets automatically debited from your bank account each month.
What are the benefits of making timely credit card bill payments?
There are more advantages to it than being asked about the payment every month.
- Regular credit card outstanding bill payments bring in a positive effect on your credit score
- Good credit scores mean availability of credit whenever you need it and that too, at favourable terms
- If you have been consistent in your outstanding payments, you may be considered for a credit limit upgrade
- It will help you put your finances on track. You can leave aside the worries about getting your credit card bill date wrong
- Automatic debit saves you the time and effort, which you would need to put in each month to pay your bill manually
- Also, you can avoid chances of paying a wrong figure
Are there any disadvantages of using automatic debit for credit card bill payments?
However, there seem to be some disadvantages to setting up an automatic debit facility for your credit card bill.
- You have no control over the figure being paid to the credit card issuer. The automatic debit feature is helpful when you keep a tab on your transactions. However, in cases where your card has had an unnoticed fraudulent transaction, then you may end up paying for that amount too
- An individual does lose control of his/her account to the credit card issuer
- Also, laxity can build up over some time, as you are ensured of your bill being paid
- Automatic debit is not helpful if you are looking to convert some spending into EMIs and the amount gets debited before you can inform the bank.
- Each time your bill is presented to your bank, you have to ensure that there are adequate funds in your bank to clear the bill. Or else you may end up paying overdraft charges or risk your bill being rejected for payment.
What payment options are available in auto-debit?
There are different payment options available for setting up an auto-debit.
1) Only Minimum Amount Due: You know that you need to pay at least the minimum amount due to avoid a late payment fee. So that is the bare minimum figure that you should pay. So, you could set up an auto-debit facility for the minimum amount due figure and decide to pay the amount over and above the minimum amount manually.
2) Auto Debit for The Entire Amount: This is the option where you decide to pay the entire amount due to your credit bill. As and when the bill is presented, any amount reflected on the bill will be debited from your account.
3) Set A Fixed Amount for Payment: If you have an idea of the range of your credit card bill, you can set that amount for the auto-debit facility. Any amount over and above this limit can be paid manually by you. For Ex: If your bill is in the range of Rs. 10000-12000 every month, you can set Rs. 10000 as the auto-debit figure and pay the amount over and above manually.
There are numerous other ways to pay an outstanding credit card bill like through PayTm, UPI, NEFT, IMPS, through a cheque, etc. Don’t let the logistics and procedures involved in a bill payment deter you from you making regular payments. Being regular with payments is the only way you can ensure a good credit score.
- Can you automate credit card payments?
Setting up auto payments is an easy way to make credit card bill payments. This can be done by signing into your account online and authorizing the credit card company to deduct the payment from your bank account on a fixed date each month.
- How do I set up recurring payments on my credit card?
Setting up automatic payments is easy and can be done through your net banking account. The process may differ from one bank to the other. To initiate the process, log in to your account and click on the credit cards section. Further, you can enable the auto-debit facility from the credit card account number by following the website instructions.
- How can I pay my bills automatically?
Online bill pay can be set up through your bank. For this, you have to share your account information for each creditor with the bank. The bank will automatically pay the bills each month from your account as designated.
- Should I set up automatic payments for a credit card?
You can use autopay for making automatic payments towards your credit card bills. You only have to ensure that the bank account has a sufficient balance to prevent any overdraft fees while performing the auto-debit.
- Do banks charge for automatic payments?
Some banks and credit card providers may charge for setting up automatic payments for monthly bills. However, this can be negotiated with the banks and the fees could be reduced or nullified by the bank.