Automatic payment is an arrangement that a customer sets up with a bank to authorize the automatic withdrawal of funds from a designated account (savings or checking) to transfer to the account of a company for payment on a regular basis, usually once per billing cycle.
Setting up an automatic payment provides many benefits to the customer, such as saving time and effort. Customers no longer need to keep track of the due date and late payments are avoided. Automatic payment is suitable for paying recurring bills such as fitness club dues, magazine or newspaper subscriptions, internet service, telephone and cable TV services, and insurance premiums. Customers are also better able to control their finances; instead of writing multiple checks, they only need to keep track of the payments in the monthly account statement.
In order to setup automatic payments, a customer must enroll a supported merchant with his bank. The bank provides a list of all merchants that it supports. Automatic payments can also be setup through the customer’s Visa or Mastercard credit card. Once you have enrolled a merchant as a third party bills payment account, you can then setup the frequency of payment that is required. Some banks might require that this enrollment process be submitted directly to the bank. Some banks might already provide an online mechanism to setup automatic payments, usually require that the customer be already registered to the bank’s online banking service.