A recurring bill payment is money that leaves your account on the same day each month (or week, or year) to pay the same bill automatically.
Instead of writing a check or logging into your account each time a bill arrives, you set it up once and it happens without you doing anything. Your bank or the company you owe money to takes the payment on a schedule you agree to — usually the same date every month. Common examples are your electric bill, internet service, car insurance, or a subscription you pay for.
The main reason people set up recurring payments is to avoid missing a due date. A missed payment can cost you a late fee, damage your credit score, or get your service shut off. Recurring payments also save time: you do not have to remember when bills are due or spend time paying them one by one.
Key Takeaways
- A recurring payment is set up once and then repeats automatically on a schedule you choose, usually monthly.
- You can set up recurring payments through your bank, through the company you owe money to, or through both.
- Recurring payments protect you from late fees and service interruptions by removing the chance you will forget to pay.
- You can pause, change the amount, or cancel a recurring payment at any time, though you should do this before the next scheduled date.
How recurring payments actually work
When you set up a recurring payment, you give permission for money to leave your account on a specific date. That permission is called an authorization. You can give this authorization to your bank (which then sends the money out) or directly to the company you owe money to (which then asks your bank for the money).
On the day the payment is scheduled, the money moves from your account to the company's account automatically. You do not have to do anything. If you have enough money in your account, the payment goes through. If you do not, the payment may fail and you may be charged an overdraft fee by your bank or a failed-payment fee by the company.
The payment happens the same way every time until you stop it. You can change the amount, change the date, or cancel it entirely — but you have to make that change before the next payment is scheduled to go out.
Two ways to set up a recurring payment
You can set up recurring payments in two different places, and the process is slightly different depending on which one you choose.
Through your bank: Log into your bank's website or app, go to the bill pay or payments section, and create a new recurring payment. You will enter the company's name, your account number with that company, the amount, and the date you want it to happen each month. Your bank will send the payment on that date. This method works for almost any bill, even if the company does not offer online payment.
Through the company directly: Go to the company's website (your electric company, insurance company, subscription service, etc.), log into your account, and look for a "recurring payment," "autopay," or "automatic payment" option. You will enter your bank account number or credit card number, and the company will take the payment from your account on the date you choose. Many companies offer a small discount if you set up autopay with them.
What to watch out for with recurring payments
Recurring payments are convenient, but they can cause problems if you are not paying attention. The most common issue is forgetting that a payment is scheduled and not having enough money in your account when it goes out. This results in an overdraft fee from your bank or a failed-payment fee from the company — sometimes both.
Another issue is forgetting to cancel a recurring payment after you no longer need the service. If you cancel a subscription but forget to cancel the recurring payment, the company will keep charging you. This is especially common with free trials that convert to paid subscriptions automatically.
A third issue is not noticing when a recurring payment amount changes. Some companies raise their prices without warning, and if you are not checking your bank statement, you might not realize you are being charged more than you expected.
To avoid these problems, check your bank statement once a month and look at all the recurring payments going out. Make sure each one is still a service you use and that the amount is what you expected. If you see a charge you do not recognize, contact the company or your bank right away.
Recurring payments versus one-time payments
A one-time payment is money you send to a company once, for one bill. You have to initiate it each time — either by writing a check, calling the company, or logging in and paying online. A recurring payment is set up once and repeats automatically without you doing anything.
One-time payments give you more control because you decide exactly when to pay and you have to actively choose to send the money each time. This means you are less likely to pay by accident, but you are also more likely to forget and miss a due date. Recurring payments remove the forgetting problem but require you to remember to cancel them if you no longer need the service.
Many people use a mix of both: recurring payments for bills that are the same amount every month (rent, insurance, subscriptions) and one-time payments for bills that vary (credit card, utilities, medical bills).
How to change or cancel a recurring payment
You can change a recurring payment at any time, but the timing matters. If you change it before the next scheduled payment date, the change will take effect on that date. If you change it after the payment has already gone out, the change will take effect on the following payment date.
To change a recurring payment, go back to where you set it up — either your bank's website or the company's website — and look for an option to edit or manage recurring payments. You can usually change the amount, the date, or pause the payment temporarily. To cancel it completely, look for a "cancel" or "stop" button.
If you set up the recurring payment through your bank, you can also call your bank and ask them to stop it. If you set it up through the company, you can call the company and ask them to stop charging you. Either way, ask for written confirmation that the recurring payment has been stopped, so you have proof if the company tries to charge you again.
Recurring payments and your bank account
Recurring payments only work if you have money in your account on the day they are scheduled. If your account does not have enough money, the payment will fail. When a payment fails, your bank may charge you an overdraft fee (usually $25 to $35), and the company may charge you a failed-payment fee as well.
Some banks offer overdraft protection, which means they will cover a failed payment by borrowing from a savings account or credit line you have with them. This prevents the payment from failing, but you still owe the money back. Check with your bank to see if you have overdraft protection and how it works.
To avoid failed payments, keep track of when your recurring payments are scheduled and make sure you have enough money in your account on those dates. If you are worried about having enough money, you can change the payment date to a day when you know you will have funds, or you can pause the recurring payment temporarily.
Frequently Asked Questions
Can I set up a recurring payment for a bill that changes amount every month?
You can set up a recurring payment for a variable bill, but you will need to change the amount each month before the payment is scheduled. This defeats the purpose of automation, so most people pay variable bills one time instead. However, some companies (like utilities) let you set up recurring payments for an estimated amount, and they adjust the next month's payment to account for the difference.
What happens if I set up the same recurring payment twice by accident?
The payment will go out twice on the scheduled date, and you will be charged twice. If this happens, contact the company and ask for a refund of the duplicate charge. Keep your bank statement as proof. Most companies will refund you within a few business days.
Is a recurring payment the same as a subscription?
A subscription is a service you pay for repeatedly (like a streaming service or gym membership), and a recurring payment is the method you use to pay for it. You can pay for a subscription using a recurring payment, a one-time payment each month, or other methods. Not all recurring payments are subscriptions — you might set up a recurring payment for rent or insurance, which are not subscriptions.
Can I dispute a recurring payment if I think I was charged wrong?
Yes. If you believe a recurring payment was made in error or without your permission, contact your bank or credit card company and explain the problem. They can investigate and may reverse the charge. You can also contact the company directly and ask them to stop charging you and refund the disputed amount.
Do recurring payments hurt my credit score?
Recurring payments do not hurt your credit score by themselves. In fact, making on-time recurring payments helps your credit score because it shows you pay your bills on time. However, if a recurring payment fails because you do not have enough money in your account, and the company reports it as a late payment, that can hurt your credit score.