What Is Online Bill Pay, and Why Should You Use It?

Online bill pay can be a helpful tool to manage bills with multiple providers in one central place using your bank’s website or app. Most financial institutions have adopted online bill pay as a core feature of the bank accounts they offer, typically at no additional cost.

Because the tool automates your bill management, you may avoid charges associated with making late payments. But before you get started, make sure you understand the risks, as well as how to minimize them, and the steps to set up online bill pay.

What is online bill pay?

Online bill pay is a digital service your bank or credit union may offer. It allows you to arrange one-time or recurring payments to various providers without visiting multiple websites or writing checks.

Using your online banking portal or mobile app, you’ll set up your payment details for each account and manage everything from one dashboard.

The bank or credit union will subtract the amount of each bill from your chosen account on the date you requested unless it is not a business day. Bank policies vary, but a recurring payment that falls on a weekend or a holiday may be adjusted to the business day before.

Overall, online bill pay can take some of the stress out of managing bills by largely automating the process. It keeps your bills organized in one place, saves time and cuts the risk of late payments — and costly late fees.

Most institutions even guarantee on-time delivery as long as your payments are scheduled before their due dates and you have sufficient funds in your account to cover them. The institution may reimburse you for any late fees caused by a bank error.

However, you’ll need to pay attention to service limits or restrictions. For example, the bank may limit you to using U.S. dollars and sending payments to a U.S.-based person or company. The bank may also discourage you from using online bill pay for certain types of bills, such as taxes or court-ordered payments.

How do you set up online bill pay?

Setting up online bill pay is generally a straightforward process that will vary by financial institution. Here are the usual steps:

1. Log in. Start by logging in to your bank or credit union account, whether you’re using the institution’s online portal or mobile app.
2. Find bill pay. Navigate to the bill pay feature, and then follow the instructions or prompts. You may need to enroll in the bank’s online bill pay service and accept its terms and conditions.
3. Add a company or person to pay. You may be able to search the bank’s site for providers, and the information may populate automatically. If you can’t find the company in a search, then you can manually enter the information.
4. Enter payment details. For each bill, you’ll typically need to provide a payment amount, delivery date and account number.
5. Schedule payments. Select one-time or recurring payment, and set a date. Build in a cushion of a few days before the bill’s due date in case of payment delays or errors.
6. Confirm your payment. Some banks may provide immediate confirmation that your payment was scheduled successfully.
7. Monitor your bill payments. You’ll need to pay your bills manually until e-billing activates, which could take up to one billing cycle. Even when billing is automated, you should monitor your payments and note when you receive a payment confirmation from the bank.

Is online bill pay safe?

Online bill pay is a highly secure way to make payments. Banks and credit unions typically use multiple security features to protect your personal and financial information.

For instance, the institution may employ:

• SSL. Secure sockets layer, or SSL, secures the connection between you and the provider. A website that implements SSL has https in its URL instead of http.
• Encryption. This tool scrambles data, allowing only authorized parties to understand the information. Data in transit, in storage or at rest can be encrypted.
• Automatic sign-out. Your financial institution may also sign you out of the account automatically if you’re inactive for a certain period of time, such as 10 minutes. This feature helps prevent another person from resuming your session if you walk away.

Beyond these safety measures, you can also keep your bank account safe by using a strong password and setting up two-factor authentication if it’s available. Two-factor authentication adds an extra layer of security to prevent unauthorized account access. You’ll start by entering your username and password — the first authentication factor — and then verify your identity in a second way involving a text message or email, a numeric code, or another identifier.

Pros and cons of online bill pay

Pros:

• Online bill pay is a convenient way to organize and manage your accounts all in one place.
• Automatic payments make it less likely that you’ll miss a payment, which helps you avoid late charges.
• You can also avoid paying for checks and postage.
• You can easily track your bills through your online account.
• Basic bill pay services are usually free.
• The service may be more secure than making payments through the mail.

Cons:

• It takes time to set up each provider and learn the bill pay system.
• If you don’t have enough money in your bank account, the recurring automatic payments could overdraw your account.
• If you cancel service with your provider, you’ll need to remember to stop any future recurring payments.
• You’ll also need to remember to update the payment amount if your bill changes.

Should you use online bill pay?

You may want to use online bill pay if your bank’s service is free and your comfort level with technology is high. It can be a convenient way to manage multiple bills in one place, especially fixed payments.

Online bill pay may not be the right fit if you struggle with technology or you need to make payments in another currency.

For bills that change each month, such as utility or credit card payments, you may want to set up autopay instead through the provider. This allows the provider to take the payments from your bank account.

Another option is asking your service provider to send your electronic bill directly to your bank. When the e-bill arrives, your bank or credit union can alert you and give you the option of paying the entire balance, minimum due or another amount.

Many banks and credit unions offer online bill pay as a free service. Financial institutions pay your bills electronically whenever possible. A paper check may be printed and mailed if an individual or business can’t accept electronic payments.