What Are Automatic Payments?

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  • Written By: Laura M. Sands
  • Edited By: Heather Bailey
  • Last Modified Date: 06 December 2019
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Automatic payments are those that are regularly scheduled, collected and processed at set intervals without using a manual submission process. Such a process begins with a written agreement between a customer and a company to which payments are regularly directed. Automatic payments are generally debited from a banking account or are charged to a customer’s credit card.

Also known as direct debit payments, automatic payments eliminate the need for customers to personally submit regular payments to a company in exchange for a product or service. Such payments are commonly set to occur on a monthly basis, but may also occur on a weekly basis, a quarterly basis, annually or whenever a particular billing threshold is encountered. Automatic payments may apply to a limited time period needed to pay a debt in its entirety or may continue for the duration of the business relationship between the consumer and the company receiving payment.

Some companies collect automatic payments directly while others regularly use a third-party company to collect payments on their behalf. Automatic payments only take place, however, after a client and a company agree to this payment method in writing. Other companies may offer clients an automatic payment plan, but may choose to hire a third-party automatic payment service to actually process billing and payments on their behalf.


The primary ways in which automatic payments are collected from customers are directly from the customer’s banking account, by debit card or by credit card. In addition to an agreement between the customer and the company to whom funds are owed, another agreement known as a standing order must exist between the customer and her or his banking institution. Without the establishment of such an agreement, direct debit payments often cannot be collected. Most banks, however, streamline this process by offering bill payment services and by integrating automatic payment options with standard checking accounts.

In opting to allow automatic payments to be debited from an account or a credit card, customers can enjoy the freedom of not having to manually pay bills in person, by phone or by postal mail. Once established, most consider this payment method to be even easier than submitting online payments since, beyond assuring that funds are available in an account, there is little else for a customer to do to assure that payments are made. Such an option is also known to be environmentally friendly, as well, since the process is also frequently accompanied by the choice to eliminate traditional paper billing altogether.


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