Finance Globe Blog

U.S. financial and economic topics from several finance writers.
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Paying Bills Online

Paying bills online is great; it saves time and money. You don't have to buy stamps and checks, and it takes less time to set up online payments than it does to write and mail checks every month. You can make online payments to your mortgage company, your utility companies, your credit accounts, and even to individuals, such as your landlord or your children's nanny. When you pay bills online, you have a few options in how you go about doing it.

Online Payments Through Your Checking Account with Your Financial Institution
Paying through your financial institution's online bill-pay service is often the most practical way to pay your bills. This method is most similar to writing a check and balancing your checkbook the old-fashioned way, except that it's done through an electronic transfer.

You can really pay anyone that has a mailing address, through online bill-pay. Small, local businesses are typically not set up to take electronic payments; a check will be mailed to their billing address directly from your bank or credit union. I was pleasantly surprised when I first found out that I could pay the local lawn care company online through my checking account.

You can set up a single payment or recurring payments online through bill-pay. Single payments work for one-time expenses, such as a medical bill or auto repair. Single payments even work for normal monthly bills, but you'll have to manually put in the payment date and amount each month. It's very convenient to set up many monthly bills as a recurring payment, even if the actual payment will be slightly different each month. Utility and credit card bills are likely to fluctuate, but it's easy to edit the payment amount or even the payment date when you need to.

Having the recurring payments in place helps to keep track of monthly due dates and make payments on time. It's easy to forget about an almost overdue bill hiding in a stack of papers, but having the recurring payments in place lets you see the due dates for all your monthly bills, itemized on one electronic page.

I usually log in each week to edit the payment amounts if I receive any bills that are different from the previous month. It takes less than five minutes; finding a pen and stamps in my house would take longer than that.

It doesn't take much effort to manage recurring payments, besides making sure the funds are available to make the payments. Someone whose income fluctuates, or who can't predict the date of their next paycheck, such as a commission-earning salesperson, may have some trouble with a predetermined recurring payment schedule. A nice cushion in your checking account can help alleviate the problem. Or it may be safer to only schedule single payments when you know the funds are available, since standard overdraft fees would apply if scheduled payments would cause the account to be overdrawn.

In setting up your payment dates, keep in mind that the transfers are not instantaneous. Payments are usually received by the payee within a week. I had thought it should take less time for an electronic payment to go through than it does for a check to be mailed, but it really takes about the same amount of time, at least with my credit union. Your bill-pay service should give an expected delivery date when you set up your payment schedule.

Setting up your online bill-pay is easy. All you need is your monthly billing statement to provide the creditor's or service provider's payment address and your account number. You'll put in the information one time, and the information is saved for your payments in the future.

My credit union had a one-day waiting period from the time I first requested to activate it, and charges nothing for the service. Some financial institutions charge a monthly fee, usually under around ten dollars a month.

Online Payments Directly Through the Payee
Many larger companies also allow you to pay online through their own website. This is common with utility companies, cable providers, or credit card companies. The best part about paying this way is that you many companies will credit the payment the day you authorize it, sometimes immediately. This can help you avoid late payment fees if you "almost" forgot to make the payment on time.

Some mortgage companies will allow you to make online payments; three different mortgage companies have owned my loan since I bought my house, and two out of three accepted online payments through their website. My current mortgage company will only allow me to pay electronically if I sign up for their automatic payment plan; instead, I just pay them through my credit union's online bill-pay to stay in control of the payments, since I don't always pay on the same date and I usually send something extra to principal.

Service-providers often make it easy to pay from your checking account or by credit card. You'll need a check to refer to if you want to pay from your checking account, so that you can supply the routing number and account number necessary for the electronic transfer. Some companies may require that you physically mail a voided check to complete your online payment request. If they accept credit card payments, and many do, you can still pay from your checking account without using a check, by using your debit card as a credit card.

One thing to look out for, some service-providers charge a fee for using their online bill-pay. This fee may range from a few dollars to ten or more, and what you're probably doing is sending a Western Union wire transfer when you authorize payment to be made this way. You may be better off just sending payment another way, unless you'll be assessed a late charge that's higher than the transfer fee.

Credit card companies usually don't charge fees to accept payments, and every one I've dealt with will need actual checking account info from one of your checks. It may take a few days for them to validate your bank account before you can pay them online, so set that up well before you need to make a payment. Also, they won't let you pay with another credit card or convenience checks unless you authorize a balance transfer. Finalizing a balance transfer can take a month or two, so it's not a good way to pay a bill that's due immediately.

Automatic Electronic Payments
This is the payment plan where you authorize a service-provider or creditor to electronically transfer funds from your checking account each month. It may be the only way some payees accept electronic payments, like my mortgage company. My health insurance provider required automatic electronic payments as a condition of coverage for the few three months; I couldn't use a credit card or send a check each month even if I wanted to.

I paid my electric company this way for a few months; the nice thing was that I never had to update my checking account's online bill-pay to reflect each month's charges. The bad thing was that I'd forget when the payment was due, and wasn't always sure what my account balance would look like when they took it out, especially after some months of high usage.

I recently stopped the automatic payments to the electric company, since it is so much easier when I can see all my bills, all the due dates, and my current checking account balance from my credit union's site, instead of having to go to each creditor and service-provider's individual sites. I decided to leave the automatic payments in place for my health insurance, since the payment is the same every month.

Online bill-pay is the easy way to pay bills.
Paying your bills online is safe, easy, and quick. You'll save money on stamps, and you may never have to reorder checks again. And, paying bills online saves time, leaving you more time for better things.
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Wednesday, 20 February 2019