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If you’re like many cardholders, you will likely want to take advantage of any opportunities to streamline your finances. A commonly used credit card feature that can make life more convenient is automated credit card payments, or credit card autopay. It’s a way to have your bill paid seamlessly on time so you don’t have to wonder, “Is my credit card payment due around now? Have I already paid it for this month?”

Understanding what autopay is and how it works can help you decide if enrolling in automatic payments is right for you. There are definite benefits to setting up autopay, but there are downsides to take into account as well. You’ll also need to consider how you’d like to configure credit card autopay, as there are a few different options.

In this guide, you’ll learn about all this topic and gain the insight you need to decide if autopay for your credit card is a good fit for you.

What Is an Automated Credit Card Payment and How Does It Work?

An automated credit card payment, or autopay, is a recurring payment that’s scheduled for the same day each month. The automatic payment is typically made on a date that’s either before or on the statement due date.

Autopay allows cardholders the convenience of making credit card payments on a periodic basis without having to manually set up payments. This also helps with avoiding late or missed payments.

When you enroll in automated credit card payments through your credit card issuer, you’re authorizing the issuer to request a certain payment amount on a specific date from your banking institution. When the autopay date arrives, your card issuer’s bank will send your bank an electronic request for the payment amount you’ve set up.

Your bank then will fulfill the payment request and send it to the merchant’s bank (i.e., your card issuer).

Credit Card Autopay Options

There are a few ways to approach automatic bill payments through your card issuer. Each has its benefits and caveats, so assess your own financial situation before choosing an autopay strategy for your credit card.

Paying the Minimum

One option is establishing automated credit card payments for the minimum amount that’s due on your billing statement. The minimum payment is the smaller amount due that’s shown on your statement or online account, and the amount varies based on your total charges at the close of your card’s billing cycle.

Selecting to pay the minimum can be useful if you don’t have enough money to repay the entire statement in one fell swoop. By paying the minimum, you’ll fulfill the issuer’s minimum requested payment and keep your account in good standing — which, in turn, helps keep your credit score in good standing.

However, this means you’ll roll over the remaining statement balance into the next billing period, which will lead to incurring interest charges. That’s one aspect of how credit cards work.

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Paying the Full Balance

You also can choose to pay the full balance as shown on the billing statement for each recurring payment. Paying the full balance is beneficial, because it allows you to avoid rolling a balance into the next billing cycle. This, in turn, means you can avoid interest on a credit card.

However, since your balance will likely vary month to month, you need to be sure you have enough cash in your bank account to cover it. Otherwise, you could wind up overdrafting.

Paying a Fixed Amount

Another option is to set up automated credit card payments for a specific, fixed amount. For example, if you exclusively use your card to pay your fixed monthly cell phone bill of $50, you can establish an autopay for $50 toward your account on a recurring schedule. You can also use this option if you’d like to make extra credit card payments throughout the month.

Benefits of Automatic Credit Card Payments

Choosing a credit card that allows autopay can be helpful for various reasons. These are a few of the major upsides to enrolling in automated credit card payments:

•   You won’t risk forgetting about a credit card payment due date.

•   You’ll avoid penalty fees and penalty annual percentage rates (APRs) for making a late payment.

•   Your positive payment history is maintained.

Drawbacks of Automatic Credit Card Payments

There are also some caveats to consider before you set up autopay. This includes the following:

•   You might face other fees if you have insufficient funds when using autopay.

•   You might slack on reviewing your monthly credit card statement for red flags.

•   You might inadvertently overspend on your card because you feel as if you’ve got the payment covered.

Factors to Consider Before Setting up Automatic Credit Card Payments

Before setting up automated credit card payments, honestly assess your finances and habits. Verify that you have sufficient deposits into your checking or savings account to cover the autopay amount you’ve set up.

And if you do set up automatic credit card payments, make sure you continue to check your monthly billing statements. Confirm that all transactions are yours and are accurate, and that your total spending is still manageable.

Setting up Automatic Credit Card Payments

The exact process for how to set up automatic credit card payments can vary somewhat from issuer to issuer, but in general, it’s pretty easy to do.

•   You will need to first log on to your credit card account either online or through the mobile app. It’s also possible to call the number listed on the back of your card to have someone talk you through it.

•   Pull up the section labeled payments, and you should then be able to find an option to manage or set up autopay. You’ll need to connect a bank account where the payments will get pulled from and select the date and frequency at which you’d like the payment to occur.

•   You should also be able to select which payment option you’d like (minimum due, the full balance, or another amount).

💡 Quick Tip: When using your credit card, make sure you’re spending within your means. Ideally, you won’t charge more to your card in any given month than you can afford to pay off that month.

Tips for Stopping Automatic Payments on Credit Card

What if you have credit card autopay activated on your account but need to halt automated payments moving forward? Federal law protects your right to rescind authorization for automatic payments. Here are a few ways to go about it:

•   Turn off autopay through your card issuer. Many credit card issuers give cardholders the ability to turn autopay on or off through the app or via their online account’s payment settings. Just make sure you do so before the next automated payment is processed.

•   Revoke authorization from your card issuer. Call your credit card issuer to revoke authorization for autopay. Then follow up the call with a written letter revoking authorization, and requesting a stop to automatic payments on your account.

•   Request a stop payment order from your bank. You can also contact your bank to place a stop payment order on any automated payment transactions requested by the card issuer.

Regardless of how you stop automated payments from occurring, continue reviewing your monthly statement and account activity to ensure that the autopay has ceased.

What Happens if You Overpay Your Credit Card Balance?

Let’s say you inadvertently set up autopay to higher than the balance — what could you do then? Typically, credit card overpayments are processed as a negative balance. A credit for the overpaid amount should be reflected on the next billing statement, assuming your new transactions bring your account above a zero balance.

However, you do have the right to request a refund from the card issuer, instead of having it applied as a credit. The Federal Deposit Insurance Corporation (FDIC) has in place regulatory credit card rules for card issuers when it comes to an overpayment on your card account. It states that upon receipt of a consumer’s written refund request for an overpayment, an issuer must provide the refund within seven business days.

The Takeaway

Automated credit card payments are a convenient option and can mean one less thing to remember. In addition to helping you keep your card account in good standing, autopay can provide peace of mind. By automating payments, you’ll more easily avoid credit card late payments, penalty fees, and penalty APRs for late payments.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Is it a good idea to automate monthly credit card payments?

Whether enrolling in automated credit card payments is a good idea depends on your current financial situation. You must reliably have the payment amount in your checking or savings account each month and not be at risk of overdrawing or having insufficient funds. Also consider your other financial responsibilities and personal money management habits to decide if automated payments are right for you.

Do automatic payments affect your credit score?

Thirty-five percent of your FICO® credit score calculation is based on your payment history. Automatic payments can help you make on-time payments for at least the minimum balance due so your payment history builds or remains positive. As long as the deposit account that automatic payment is drawn from has adequate funds, the credit card autopay transaction can be advantageous to your credit profile.

Do banks charge for automated credit card payments?

No, banks and credit card issuers don’t typically charge an additional fee to make automated credit card payments. Autopay is intended as a payment convenience for cardholders. But ultimately, it helps card issuers and banks better secure repayment from customers, thereby lessening the risk of a late payment or delinquent account.

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SOCC1023002

The yield curve itself is a basic graph of the interest rates paid by bonds at different maturities (e.g., two-year, five-year, 10-year bonds). But many investors interpret the slope of the yield curve as a harbinger of what might lie ahead for the U.S. economy.

The yield curve can be an indicator of economic expectations, but not a reliable predictor of events. That said, analysis of historical data patterns shows that understanding the yield curve can be useful for investors.

4 Types of Yield Curves and What They Mean

The yield curve is published by the Treasury every trading day. It reflects the yield or interest rates paid by Treasury securities for one-month through 30-year maturities. The Treasury’s figures also help to set the rates for other debt securities on the market, as well as mortgages and other loan rates offered by banks.

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What is a yield curve, and what does it look like? Here are four common yield-curve patterns and what each might mean for investors.

1. Normal Yield Curve

Under ordinary conditions, longer-maturity bonds will offer a higher yield to maturity than shorter-term bonds. For that reason, the “normal” yield curve shape has an upward slope, with longer-maturity debt providing investors with higher interest rates.

For example, imagine that a two-year bond offers a yield of 0.5%, a five-year bond offers 1.0%, a 10-year offers 1.8%, and a 30-year offers a yield of 2.5%. When these points are connected on a graph, they exhibit a shape of a normal yield curve. It is the most common type of curve, and tends to indicate a positive economic outlook.

2. Steep Yield Curve

Just as a normal upward-sloping bond yield curve is associated with periods of economic expansion, a steep yield curve is seen by investors as an even stronger sign of economic growth on the horizon — as future yields rise higher to take possible inflation into account.

Another reason that a steep yield curve might indicate periods of stronger growth is that lenders are willing to make short-term loans for relatively low interest rates, which tends to stimulate economic activity and growth.

In late 2008, the yield curve became notably steeper, as the Federal Reserve eased the money supply in response to the financial crisis. A bull market followed that lasted over a decade, from 2009 to 2020.

3. Inverted Yield Curve

Bond yield curves aren’t always normal or upward-sloping. With an inverted yield curve, for instance, the yields for shorter-term debt are higher than the yields for longer-term debt. A quick look at an inverted yield curve will show it curving downward as bond maturities lengthen, which can be a sign of economic contraction.

Since 1955, an inverted yield curve has preceded most, if not all U.S. recessions that have occurred. Usually, the curve inverts about two years before a recession hits, so it can be an early warning sign.

The reason is that, historically, an inverted yield curve can reflect significant shifts in the economy or financial markets. The yield curve might invert because investors expect longer-maturity bonds to offer lower rates in the future, for example. One reason for those lower yields is that often during an economic downturn investors will seek out safe investments in the form of longer-duration bonds, which has the effect of bidding down the yields that those bonds offer.

Inverted yield curves are uncommon, and sometimes decades will pass between them. In October 2007, the yield curve flattened (which can precede an inverted yield curve) precipitating the global financial crisis.

4. Flat and Humped Yield Curves

There are also flat or humped bond yield curves, in which the yields of shorter- and longer-term bonds are very similar. While a flat yield curve is self-explanatory, a humped yield curve is one in which bonds with intermediate maturities may offer slightly higher yields. Those higher yields in the middle give the curve its hump.

Investors see flat or humped yield curves as a sign of a coming shift in the broader economy. They often occur at the end of a period of strong economic growth, as it begins to spur inflation and slow down. But these yield curves don’t always portend a downturn.

Sometimes a flat or humped bond yield curve may appear when the markets expect a central bank, such as the Federal Reserve, to increase interest rates. Flat and humped markets can also emerge during periods of extreme uncertainty, when investors and lenders want similar yields regardless of the duration of the debt.

What Is the Current Yield Curve?

When investors ask, What is the yield curve?, it’s important to remember that it’s not a fixed market factor, but one that changes daily.

Here’s an example: On October 5, 2021, the three-month Treasury bill paid an interest rate of 0.04%, while the two-year bond paid an interest rate of 0.28%, the five-year bond paid an interest rate of 0.98%, the 10-year bond paid an interest rate of 1.54%, and the 30-year bond paid an interest rate of 2.10%.

The yield curve on that day, with lower short-term yields that rise as the duration of the debt security grows longer, is a good example of a “normal” yield curve.

The difference between the 0.04% yield offered by the three-month T-bill and the 2.10% yield offered by the 30-year bond on Oct. 5, 2021, was 2.06%. At the beginning of August, the three-month Treasury bill paid an interest rate of 0.05%, while the 30-year Treasury bill paid an interest rate of 1.86%. The difference at that time was 1.81%. So it would be accurate to say that the yield curve is normal, and grew somewhat steeper over the course of about two months.

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How Investors Can Interpret the Yield Curve

The yield curve has value for investors as an indicator of a host of economic factors, including inflation, growth, and investor sentiment. While it can’t be used to make exact predictions, the yield curve can help investors anticipate potential economic changes, and weigh their financial choices in light of this. The yield curve can’t necessarily help investors choose individual stocks, but it can be of use when formulating broad investment strategies.

For example, if a flat or inverted yield curve indicates the possibility of an economic slowdown, then it might be a good time to purchase the stocks of companies that have historically done well during economic downturns, such as providers of consumer staples.

But if the yield curve is steep – indicating economic growth and higher interest rates – it may be worth considering adding more luxury-goods makers and entertainment companies to your portfolio.

The yield curve also has ramifications for real estate investors. A flat or inverted curve could warn of a slowdown and a drop for current real estate prices. But a steepening of the yield curve can mean just the opposite for real estate.

Changes to the yield curve have the most profound implications for fixed-income investors, however, as steep yield curves indicate that inflation is on the way. And inflation has the effect of eroding the yields on existing bonds, as the purchasing power of those yields goes down.


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Fixed-income investors also face unique challenges in the rare event of a yield curve inversion. Many investors are accustomed to earning a higher yield in exchange for longer debt maturities, but in an inverted curve, they can no longer find that premium. As a result, many of these investors will opt for shorter-term debt instruments, which offer competitive rates, instead of getting locked into the low rates offered by longer-term bonds.

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The Takeaway

The yield curve may be just a basic graph of the interest rates paid by bonds of different maturities, but historical data shows that the yield curve can also be a useful economic indicator for investors. You don’t want to take it too far and assume the yield curve can predict economic events, but since the yield curve is published every day by the U.S. Treasury, it can capture certain economic shifts in real time.

With a normal yield curve, short-term bond rates are lower than long-term bond rates, and the curve swoops upward — which is a positive economic indicator, suggesting steady economic growth and investor sentiment. When short- and longer-term bond rates are similar, and the yield curve flattens, that can indicate that some economic changes may be afoot. Historically, when the yield curve inverts and short-term bond rates are higher than long-term rates, that can signal a recession might be down the road.

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