In times like these, it is probably a good idea to start automating many areas of your finances. With direct deposit of your paychecks and automatic bill payments, you don’t need to worry about any mail delays and shuttered bank branches. Doing these things will allow you to have access to your money faster, avoid missing deadlines that could hurt your credit score and you may even qualify for discounts and other perks. Continue reading to learn more about direct deposit and automatic bill payments.
You’ll Get Paid Faster Wherever You Are
If you don’t already get your paychecks through direct deposit, now is the time to make the switch. This way, you can get your hard earned money no matter where you are, whether you are remotely working or travelling. All you have to do is provide your employer with your bank account number and your bank’s routing number, and sometimes a voided check.
You can, or may have to, sign up for direct deposit of other payments, such as your Social Security benefits, pension payouts, military retirement pay and unemployment benefits.
Your Tax Refund (and Stimulus Payments) Will Arrive Faster
The fastest way for you to get your refund or stimulus payments will be to sign up for direct deposit. The money will generally arrive within 21 days, according to the IRS. You can input your bank’s routing number and your account number directly onto your Form 1040, or submit Form 8888 if you want to split your refund among multiple accounts or use it to buy savings bonds. See the IRS factsheet for more information. The IRS also uses any direct deposit information from your last tax return on file when making stimulus payments.
You Won’t Miss Bill-Pay Deadlines, Which Can Help Your Credit Score
Paying bills on time, whether it be credit card bills, electricity bills, and others is a fundamental finance management skill. With automatic bill payments, you will never have to worry about missing payments because it will get paid on the date that you specify. An added benefit of never missing a bill payment is the improvement of your credit score. Making regular, on-time payments will show to lenders that you have a good credit history.
It is very easy to set up automatic payments for your fixed bills. such as mortgage or car loans. Keep in mint when setting up autopay for a variable payments, such as credit cards because you may not always have enough money in your bank account to make a full payment.
Get Discounts on Your Car Loan, Home Equity Loan and Other Debt
You won’t be the only ones to benefit from automatic payments because banks like it since they will most likely get their money on time. By enticing more people to sign up for autopay, lenders will often offer incentives to customers.
For example, TD Bank offers home equity loan borrowers a discount when they sign up to make ACH payments (electronic payments) from a TD account. Some banks will even reduce interest rates on personal loans by 0.25% when you pay via automatic deductions from a checking or savings account, or they may offer a special benefit for making 12 or more consecutive monthly payments in full and on time.
You’ll Get a Break on Student Loan Interest
Signing up for automatic bill payments can also give you a break on your student loans. For example, students who utilize auto debit for Sallie Mae’s private student loans can qualify for a 0.25 percentage point interest rate discount/reduction. Keep in mind that you will need to be up to date to qualify for the discount.
Most reputable private lenders offer an autopay discount of at least 0.25 percentage points.
Get a Discount on Your Car, Home or Renters Insurance Premiums
Car, renters, and/or home insurance companies may even offer discounts for customers who set up automatic bill payments. You can choose to set up bill payments with a checking account, credit card or debit card. The specifics will depend on the insurer, but it may be a one-time discount of $50 to $100. Paying your bills automatically can help you out on your insurance premiums. You’ll be less likely to miss deadlines that could hurt your credit score, and your credit score can affect your insurance premiums in most states.
You’ll Make Saving a Priority
If you have a 401(k) at work, you know how the automatic contributions make it easy to save. Automatic payments or direct deposit into your account will help you save money since you don’t have to think about it. This helps you meet your financial goals without too much thought.
You can also set up automatic contributions into your IRA, emergency fund or other accounts. This is a great method in continuing to add to your nest egg. Also, over time, you will adapt to working with the money you have left over and force yourself to work around the money you are saving. This will be more evidently useful in preventing you from overspending and making your stick to your budget.
Makes It Easy To Pay For Subscriptions
If you’re ever in the middle of a show one day and try to continue it the next day just to find yourself unable to continue to watch because of a missed payment, we know the feeling. With automatic bill payment setup, it is simple to always make sure your subscriptions are paid for. However, be careful with this because it is easy to forget that you are paying for it and you aren’t even using it.
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Bottom Line
Review your bank and credit card statements every couple of months and make sure that everything looks right in terms of payments and to make sure that your direct deposits are reaching your bank account. Direct deposits can help you get some discounts on your insurance, loans and more from banks. Automatic bill payments can help with your credit score as it makes sure you make your payments on time. For more posts like this, check out our list of bank guides.
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