A pre-authorized payment can be set up to automatically pay your credit card balance every month by auto debiting your bank account. This saves you the time of having to manually pay your bill every month, and it also means no more late payments. When setting up an electronic payment to your card company you can usually choose between paying the minimum payment automatically each month, or the entire balance.

Pre-authorized payments can also be setup to pay other bills such as your cable or phone bill by automatically charging your credit card each month. Although the purchases are now getting charged to credit, it works the same way. If you decide to close a credit card account and have pre-authorized payments getting charged to the card, always be sure to cancel them before you cancel the card.

Although pre-authorized payments can be convenient, before you set them up it’s important to make sure that you’ll have an adequate balance available every month for the automatic payments. You don’t want to get stuck with any overdraft fees from your bank for having a negative balance, or fees from the credit card company for going over your limit due to the automatic deductions.

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