What are automatic payments?

When you make an automatic payment, you’re telling your bank to transfer money on a set date and for a set amount, to pay a bill. Automatic payments are made with either a checking account or credit card, and in most cases, you’ll do this with the creditor or vendor directly, but it can also be done directly from your bank.

When done with a credit card, automatic payments act simply as a recurring charge on your account. For instance, you might do this with your Netflix account. In this case, you add your credit card to your account and Netflix charges you every month. Done.

When you pay with a checking account, it’s a little different. In nearly every case, the payment is made via ACH—Automated Clearing House—which is an electronic payment system. This essentially routes the funds electronically from your bank to the company you’re paying (such as your credit card bill).