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What is a Pre-Authorized Payment?

13 August 2010 by CreditCardsCo™

Trying to keep up with all your payments can be quite a tough task in the current day and age. With more expenses coming through the mail every month, it usually ends up being quite difficult in trying to keep track of what you have to pay and what you don't. The confusion usually takes places where you get the odd bill that is not due every month but is rather a one off payment. In such cases, many people are known to over look their regular commitment payments that are due every month and tend to go over the due date limit. This in effect sees them having to an extra penalty on late payments.

Financial cards such as credit cards and debit cards have been devised so that keeping track of all our income and expenses is done with relative ease. We all do not have the money to pay for an advisor to handle all of our payments, which is why new inventions are always being bought into the financial market. One such facility is known as a pre-authorized payment system. This system has been around for quite some time now, however has mainly gone unnoticed under the radar due to a lack of knowledge and awareness.

How does a pre-authorized payment system work and what exactly is it? It is one of the great banking facilities that have been made available in the 21st century. As I'm sure, many of you have regular payments that you are required to meet on a monthly basis. This could be something as small as a fixed line rent for your cable connection to something more substantial such as a fixed payment for your mortgage. Even though the amounts that you have to pay for these two separate expenses are quite substantially different, the one thing in common is that the price you need to pay every month is fixed. Missing the due date of any of these payments would mean you having to pay an extra penalty on top of the initial amount.

This is where pre-authorized payments come into play. A pre-authorized payment is an agreement with your bank to automatically pay a certain amount due to a third party at a particular date every month. What this basically means is that once you have set up the pre-authorized payment, you no longer have to worry about making sure that the payments are made every month. You basically end up giving the responsibility and authority to your bank to make the payments on your behalf to a particular third party.

Pre-authorized payments can be authorized through a check being or standing order being issued to your bank. To find out all the possible ways by which one can set up a pre-authorized payment, it would be a good idea to visit your local branch. Most banks have the same procedures in place; however it is a good idea to get some feedback directly from your bank staff. It is important that you still keep a regular check to make sure your banks have issued to payments.

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