Automatic Payment
A pre-authorized recurring bank transfer or card charge that pays a bill on a fixed schedule without manual action.
What is Automatic Payment?
An automatic payment (also called autopay) is a pre-authorized arrangement in which a bank, credit card issuer, or service provider is permitted to pull a set amount — or the full balance due — from a consumer's bank account or credit card on a scheduled date each month. Autopay eliminates the risk of late payments, protecting credit scores and avoiding late fees. Common uses include mortgage payments, utility bills, subscription services, insurance premiums, and minimum credit card payments. Consumers should monitor automatic payments regularly to catch unauthorized charges, price increases, or subscriptions they no longer use. Setting autopay for at least the minimum payment on credit cards is a widely recommended personal finance practice.
Example
A homeowner sets up automatic payment for their $2,100 monthly mortgage. Each month on the 1st, the bank automatically debits their checking account, ensuring the payment is never late, protecting their credit score, and eliminating the risk of foreclosure proceedings from a missed payment.
Source: Consumer Financial Protection Bureau — Automatic Payments