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Banking 101: Reasons to Use Bill Pay


Written by Katherine Gustafson | Published on 2/23/2019

Note: This article is part of our Basic Banking series, designed to provide new savers with the key skills to save smarter.

What is online bill pay?

It’s likely that you juggle a lot of bills each month: rent or mortgage, cable, phone, utilities, credit cards — the list goes on and on. Online bill pay is a service that many banks and credit unions offer to help customers pay their bills quickly and seamlessly — you can have money sent directly from your bank to those you owe with the click of a button.

While it’s been possible to pay bills online for many years, customers used to have to pay each provider separately using a credit or debit card on that provider’s website. Now that banks and credit unions are improving their bill-pay services, it’s one-stop shopping: You can control all your payments from a single dashboard.

Your bank or credit union will likely allow you to receive an e-bill — an electronic version of your paper bill that comes right into your bill-pay account. Tracking and paying bills has never been easier.

Why should you use a bill pay service?

Using an online bill pay service can reduce your stress, automate your bill-paying and save you money by avoiding fees. You can stop receiving paper bills, stop writing checks and spend nothing on postage.

You also won’t need to visit 10 separate websites to pay your bills each month. You can just sign in to your bank’s portal and pay via the central dashboard. You can even have payments sent automatically, saving you the need to remember. If you’re always on the go, you can pay bills via your bank’s mobile app.

Another great benefit of using bill pay is that you can avoid late fees; many banks and credit unions will even reimburse you any late fees if the payments don’t arrive on time for some reason.

What to watch out for when using a bill pay service

While online bill pay is a wonderfully convenient service, there are still a few risks you take by banking this way

One is that the ease-of-use can lull you into forgetting about the need to proactively manage your bills. If you’ve set up a recurring payment, you must have a sufficient amount of money in your account every time that payment occurs. If you aren’t vigilant, this can get you into trouble. Additionally, if you expect to pay manually but haven’t set up the right notifications to be alerted when a bill is due, you may forget to check and miss the date.

Another risk involves the inherent insecurity of online banking in general; doing financial business online exposes you to potential risks if security breaches occur. To keep this risk as low as possible, create strong passwords and always use a secure network when signing into your bank account online. This is more difficult to ensure if you are banking through your phone; avoid doing online banking — including bill-pay — on public Wi-Fi networks.

The risks are worth the benefits where online banking and bill pay are concerned. Use the system correctly and with an eye toward security, and you’ll find life that much easier.

Comments
NYCDoug
NYCDoug   |     |   Comment #1
Compounding confusion (with regard to your available balance) is that some banks will debit a payment from your account when your check is sent, others on the target payment date, and still others not until your check actually clears. And the bill pay service may be run by a third party (contracted by the bank). Further -- and especially so if your check is mailed, rather then sent electronically -- there is no guarantee that it will arrive in time.

Bottom line, there can be multiple moving parts to be aware of when using a bank's bill pay service, and multiple ways in which it can go awry, with unpredictable results. If you move to a new bank, don't assume their bill pay policy will be the same as the one you've gotten used to at your old bank.

Rather than "pushing" your money out through your bank's bill pay service, a better (cleaner/clearer) way is to schedule payment as an external "pull" from your biller's website. Then there should be no concern regarding missed payments, or late fees. Just be sure to keep your checking account flush with sufficient cash to cover your expenses.

To stay on top of things, I'd also suggest you schedule these payments as your bills come in (your payment can be scheduled for the due date, as much as a month away). This is far less risky than setting up auto-pay, a lazy man's approach which is fated to one day catch you with your pants down, as you get distracted by the inevitable surprises we all encounter in the course of our lives, both pleasant and less so. (Think vacations, funerals, etc.)
HighYield
HighYield   |     |   Comment #2
I think all the utility companies and cell phone providers have automatic monthly bill pay? I haven't signed up for that service, but it would seem convenient.

I have 6 monthly bills. I use my cash rewards credit card to pay them. Some charge a $1.50 fee for paying with a credit card, but the 2 percent reward is uaually higher in the end.
deplorable 1
deplorable 1   |     |   Comment #3
I agree paying monthly bills with a rewards credit card is the way to go. Using the right combination of cards will earn you 2-3% cash back on all recurring monthly bills. The only thing to watch out for is to make sure to update the credit card expiration date for each bill when you receive a new card. Many utility companies will remind you to do this by email if your card expiration date has expired. Then you can just schedule your credit card bills to be paid on the due date online when the new statement comes out each month. This way all your bills are automatically paid on time and you get a 0% 30 day float on the credit card bill. Obviously this will only work if you pay off your entire credit card bill in full and on time each month.
NYCDoug
NYCDoug   |     |   Comment #4
Agreed! And there may be ways to avoid that pesky fee. RCN waives it if you pay via their smartphone app (but not if you pay online, or by phone).
NYCDoug
NYCDoug   |     |   Comment #5
We're actually planting the seeds for a new, contrary post: "Reasons NOT to use Bill Pay"
Jennifer
Jennifer   |     |   Comment #6
If you pay your credit cards monthly, paying bills with at least a 2% cash back or rewards credit card is the only way to go barring any fees that make it illogical on a case by case basis (for example, I get an electric bill that charges too high a fee if you use a credit card and i would actually lose money by using a credit card).
I adore PenFed's 2% visa card for day to day bills. And the 6% cashback Amex at grocery stores. And the 3% cashback Uber card good at all restaurants.
deplorable 1
deplorable 1   |     |   Comment #7
Those are some interesting credit cards I was not aware of. Here are the cashback cards I use regularly and all have $0 annual fee:
1. Citibank 2% card(default card for everything that isn't in a specific rewards category)
2. Huntington voice cars 3% on all utilities
3. Speedy rewards Mastercard(7% cashback on gas)
4. NFCU Amex more rewards 3% on groceries with no cap
5. Sams and Costco credit cards 5% on gas(everywhere) 3% on all restaurants
6. Bank of America cash rewards for 3.3% online shopping and 2.2% at Sams/Costco(rewards include 10% customer bonus)
7. Chase Freedom/Discover/Citi dividend cards for multiple 5% rewards categories
It's a bit of a hassle but I can average 3-4% cashback on every purchase using this combination of cards.
larry
larry   |     |   Comment #8
That's a nice list there you got d1. We utilize our two main go to cards from Discover and Chase Freedom both no annual fee. What we do is front run those 5% rewards regarding grocery stores, Sam's Club and Amazon. Those are our biggest expense and will take us through the rest of year getting 5%. We can't use cc for a utility like electric nor can we pay our tax bill using cc. Would like to get 2% for the other utilities though and may have to look into Huntington voice card 3% on all utilities. What's the cap and annual fee on that one? tia
deplorable 1
deplorable 1   |     |   Comment #10
The Huntington voice card has $0 annual fee and a 6,000 point cap which works out to $2,000 per quarter the 3% utility category also now includes office supply stores as well. I'm thinking of adding this card to my arsenal for utilities and department stores:
https://mycard.usbank.com/credit/mycardusb/html/usbank_cash_plus_visa.html?redirect=cashplus&lang=en&exp=
It also has a $150 signup bonus $0 annual fee and you get to pick 2 5% categories. Also has a $2,000 cap per quarter. You may want to look into this card Larry.
Jennifer
Jennifer   |     |   Comment #9
deplorable, Looks like you have a well organized credit card plan. I also do the Chase Freedom/Citi Div/Discover 5% categories when they peak my interest.

Regarding the 6% grocery store Amex, it does have an annual fee. However, I did the annual analysis based on my grocery spend and it is still to my advantage to pay the fee and collect the 6%(up to their 6,000 annual cap). Previously I had a no fee Amex that paid a lesser bonus.
deplorable 1
deplorable 1   |     |   Comment #11
I would get that AMEX card except for the fact that I get grocery stores at 5% for half the year anyway and 3% for the other half with no annual fees. Depending on what cards you have that AMEX card can be a good deal even with the annual fee.
369741
369741   |     |   Comment #12
Thanks for listing all of these cards. I have been using a Discover card that gets 2% for gas and 1% everything else. Historically, this has been a great card because you can use the rewards to get Pep Boys $25 cards for $20. They just did away with the Pep Boys, and the only interesting choice for me is the Lowe's $100 card for $90. So, I will have to consider some the cards you listed to see if I can get better deals.
deplorable 1
deplorable 1   |     |   Comment #13
I only use the Discover card for the 5% bonus categories. 5% on groceries currently. The $20 for $25 gift cards are a great deal and the best way to cash in rewards. They keep changing their offerings so a bit of a moving target.
Don't Leave Home Without It
Don't Leave Home Without It   |     |   Comment #14
Let's hope deplorable never gets his wallet stolen.
DCGuy
DCGuy   |     |   Comment #15
Photocopy the front and back sides of all credit/debit and other ID cards and save in a safe place.
DCGuy
DCGuy   |     |   Comment #16
Note: Do not photocopy US Government ID credentials. It is illegal to do that. If you lose the ID notify the agency security office and your manager.

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