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Recurring payments in investment strategy mode

Recurring payments

5 min reading

Do you have any understanding of recurring payments and their usefulness? Find out more in this article.

Recurring payments

Recurring payments in investment strategy mode

Recently, the recurring payment has become hugely popular with consumers. This is obvious, as it is simply an ideal option. You do not have to worry about having to make a payment on time. Funds are automatically deducted from your account and you, for example, continue to watch your favourite TV shows carefree or get your box of food for the day every morning. That’s what a recurring payment system is for. Keep reading this article to look more closely at this concept and to find out all things systematic investment.

What are recurring payments?

Let’s start with the concept of recurring payments. It is a procedure for a manufacturer or service provider to automatically debit your account for the purchase of a particular good or service at identical intervals. The payment schedule should be negotiated in advance and requires you to approve the withdrawal of further amounts. When first receiving the desired goods, you should provide the card details. After that, all other transactions take place automatically. In most cases, recurring payments are automated transactions that operate on a set date after the subscription has been made. There are other common cases associated with recurring payments, including membership fees, utility payments, online tutorials, etc. Their inevitability lies in the fact that they function according to a set schedule given by you, as being recurring transactions. As different business models evolve around the world, there is a necessity to streamline the billing process. Recurring payments create a great business environment for both merchants and you.

Types of recurring payments

Following, let’s consider what types of recurring payments exist. In general, there are regular and periodic (or irregular) payments. Regular recurring payments follow a fixed schedule. An example would be paying for certain services at the very beginning of the following month. The same applies to weekly, quarterly and annual payments. Periodic (or irregular) recurring payments follow a certain pattern. The service provider does not charge your account once a month or once a week, but when the time comes to provide the service. A recurring payment system could be involved for businesses as well as for ordinary customers. According to this, we can divide the payments into two other types: annuity payments and differentiated payments. An annuity payment involves paying off the debt in fixed instalments, making it particularly convenient to connect a regular charge-off. In the case of a loan agreement, a differentiated approach divides the debt into equal instalments. Payments take monthly or quarterly payments.

Advantages 

Recurring payments have a number of significant benefits. Of course, if you have not paid your utility bill on time, nothing serious will happen. However, if you don’t have money on your telephone or internet bill, it can unexpectedly interfere with your work. That’s why recurring payments are there to optimise your life as much as possible. Recurring payments, apart from mobile phone and internet payments, are handy for those who pay their insurance in monthly instalments. You can also set up these kinds of payments, for example, if you plan to go on holiday or a business trip. For instance, you can recharge your account every week with a certain amount and once you know the dates of the holiday, you can edit or cancel the automatic payment for that period. If there are no funds on your card, you can recharge it within a few days. If you set up a recurring payment, there is no need to re-enter your card details manually into the system – payments will be automatic.  

Possible risks in recurring payments

This payment system also carries a number of risks. Once you agree to a recurring withdrawal, there are risks that you should be aware of. Firstly, you may inadvertently forget you have registered for the service and given permission for a recurring withdrawal. Secondly, otherwise, any mistake made will be impossible to rectify. And thirdly, you may want to terminate the contract. This too may result in claims and negative perception in the future. So be careful whenever you do anything.

Systematic/recurring investment

And finally, we will discuss the topic of systematic/recurring investment. Systematic investing is a procedure whereby you can make regular, identical deposits into mutual funds, trading or retirement accounts. Systematic investing promotes the habit of saving regularly, and since purchases occur at varying market prices, you should essentially calculate an average purchase price for investments. While most investors gain systematic investment experience by participating in an employer-sponsored retirement plan, investment companies provide many programmes that allow shareholders to create their own individual systematic investment programmes. Such programmes include automatic investment plans and negotiated investment plans. Many investment institutions offer a similar plan. It is an investment programme where you can regularly (monthly, quarterly, half-yearly or yearly) invest small cash amounts. The money comes automatically from your current/savings account or salary. 

However, recurring payments are a useful and effective technical solution, just don’t forget to be aware of its drawbacks. The recurring payment mode helps to streamline anyone’s life by making routine payments automatic. With these kinds of payments, you can never miss out on anything, so you won’t have any trouble making your payments.

Conclusions