There was a time not so long ago when people were hesitant to pay their bills online. Many people distrusted the security of Internet transactions and viewed online bill payment as a loss of control over their money. If you gave your checking account number to your insurance or utilities provider, what would stop them from overbilling you or maybe even stealing your identity? Somehow, writing checks and stamping envelopes seemed safer, and lots of people clung to that ritual.
So, why should you pay your bills online? For starters, you'll save money -- both on postage and late fees -- as well as time. Online bill payment is also safer than the snail-mail method: Your personal information is much more vulnerable to theft if it's on paper and physically moving through the postal system. You can also use your credit card to pay all your bills, which can make it easier to keep track of financial matters -- and you can earn airline travel miles and other cash-based rewards while you're at it.
There are three main ways to pay your bills online: through your bank, on the biller's site or with a third-party bill payment service. There are advantages and disadvantages to each, so the method you choose depends on your personal preferences. Here five reasons to take the leap and do all your bill-paying online.
Fast, Easy and Safe
When you think of online bill payments, you probably imagine setting up automatic drafts from a bank account to pay your cable or utility bills. But people are increasingly opting to bay bills online with their credit cards. More and more merchants are accepting credit cards as online payment, so if you want to use plastic to pay your bills -- even rent or mortgage -- chances are you'll be able to do it.
No bones about it: Online bill payment is faster and easier than the check-and-stamp method. Basically, it eliminates the procrastination factor. There are no paper bills to leave on the counter until you suddenly remember that it's two days past their due date. You can set up monthly payments through your bank or the biller and never pay a late fee again. If you go online to pay the bill every month instead of doing automatic payments, that's still going to save you time, frustration and stamps. Even if you wait until the last minute to pay online, you save precious days since online transactions typically process much faster than mailed ones.
There's always the threat of hacking, spyware and viruses when you're online, of course (automated payments lessen your risk of these), but the risk of mail theft is also significant. The fewer paper statements, checks and personal information you let physically float through the mail, the better. And when you pay bills online, you also have more recourse if there's a dispute since you can look up records of pay dates and amounts.
So contrary to the once-popular belief, online bill payment is safer than snail mail, and there are added safeguards when you use a credit card to pay your bills.
Credit Card Payments Allowed
Paying your bills with a credit card has a number of advantages. For one, think of all the travel miles you could rack up by using your airline-linked credit card to pay tuition and student loans! It also lends an extra layer of security to the payment process. And if you happen to be short on funds, using your credit card subtracts the worry about overdrafts from your checking account. You'll also be able to spot billing errors more easily if you're just looking at one credit card statement every month.
The best way to get started using your credit card for online bill payment is to go through your bank's Web site. If you already have regular online payments scheduled, just replace your bank account information with your credit card number. If you pay online directly through the biller's Web site, you'll need to replace any stored account information there with your credit card information. As always, though, be careful of your spending -- don't let the additional charges cause you to carry a balance and rack up unnecessary debt. And remember: Banks and merchants can usually obtain a new expiration date if your card has expired, but you should regularly check to make sure all your payment information on file is correct and current.
When you move your bill payment operations online, you'll be doing your part to preserve the Earth's resources -- and some cash.
One of the biggest advantages of paying your bills online, of course, is getting rid of all that paper. Your bank or service provider will ask if you'd rather get statements and reminders e-mailed to you. These days, pretty much any bill that can be mailed can just as easily (and usually more cheaply) be sent electronically. Less mail and fewer envelopes to open (and then refill) means less hassle for you -- and less paper waste in the landfills. And if fewer bills have to be created, that means much less energy and fuel being expended on printing, processing, mailing and transporting them. It's a safe conclusion, then, that online bill payment is an all-around winner in terms of environmental benefits.
And then there's the money-saving part. Obviously, if you're not sending checks in the mail, you're not buying stamps. And because of the aforementioned printing, processing, mailing and transporting, companies spend a whole lot less money on online transactions than they do on the snail-mail variety. This makes them happy, which (sometimes) makes them willing to spread the savings to you, which (sometimes) means lower fees.
Online bill payment lets you declutter your finances (and your counter) in one fell swoop. If you're not a particularly organized -- or technologically gifted -- person, paying bills online might sound a little daunting. You might feel like it's easier to receive the paper bill in the mail, write a check and send it on its way again. But really, nothing could be simpler than online bill payment. Sure, there's a little setup time, but once that's done, you'll never have to worry again about late fees or losing things in the mail (or in the gigantic pile of junk mail on your counter).
There are quite a few services -- like PayTrust, Quicken BillPay, MyCheckFree and Billeo -- that allow you to consolidate bill paying. (Sites like Mint and PageOnce let you see all your accounts and use budgeting tools, but they don't have a bill payment function.) So if you're weary of jumping from site to site or pulling out the checkbook at different times of the month when bills are due, a third-party online billing service could be just what you need.
All your bills are collected (in some cases, scanned), e-mailed to you and posted to your account, and they're automatically paid out of the accounts you select on the dates you designate. You can see bill calendars and receive alerts when bills are due. With some services, you can pay anyone from any bank account (and sometimes with a check or credit card) [source: Pinsker]. And no more forgetting user names and passwords to pay each bill separately! Doesn't get too much easier than that, right?
Of course, all of these bells and whistles don't come for free (most services charge a few dollars per month plus a small fee per transaction), but many people find that it's a small price to pay for the convenience.
When you're organizationally challenged and pay bills the old-fashioned way, it can be easy to lose focus on your finances. Once the cable company has been paid for the month, the bill usually gets shredded, filed or lost in a heap of paper. If the amount suddenly changes or there are any unusual charges to your account, you might not realize it for months. But if you pay online, you can see all your records and immediately know if something is amiss. And if you use a third-party bill-payment service, everything is all there in one place for instant viewing. It's like hiring a professional organizer -- for free!
Is this the payment method of the future? No cash, no credit card, just your smartphone and your finger? Find out how Square works at HowStuffWorks.
- Aho, Karen. "And Now, a Fee to Pay Your Bill." MSN Money. (Oct. 6, 2011) http://articles.moneycentral.msn.com/SmartSpending/ConsumerActionGuide/AndNowAFeeToPayYourBill.aspx
- Bankrate. "Online Banking." (Oct. 4, 2011) http://www.bankrate.com/finance/checking/online-banking-1.aspx
- Carrns, Ann. "Citibanks Adds Money-Tracking Tools to Online Banking." The New York Times. Oct. 3, 2011. (Oct. 4, 2011) http://bucks.blogs.nytimes.com/2011/10/03/citibank-adds-money-tracking-tools-to-online-banking/?scp=1&sq=ron%20lieber%20online%20bill%20payment&st=cse
- Consumer Search. "Online Bill Paying: Reviews." March 2008. (Oct. 4, 2011) http://www.consumersearch.com/online-bill-paying
- Dunn, Collin. "Pay Your Bills Online to Save Time, Stamps, Paper." Planet Green. Jan. 29, 2008. (Oct. 6, 2011) http://planetgreen.discovery.com/home-garden/save-time-stamps-paper-pay-you.html
- Fiserv. "2010 Billing Household Survey." (Oct. 6, 2011) http://www.fiserv.com/RP_fiserv-2010-billing-household-survey%281%29.pdf
- Lieber, Ron. "Automated Bill Payments are a Cinch (Not So Fast)." The New York Times. Aug. 29, 2008. (Oct. 6, 2011) http://www.nytimes.com/2008/08/30/business/yourmoney/30money.html?_r=1&em&oref=slogin
- McCune, Jenny. "Your Online Bill Payment Options." Bankrate. (Oct. 6, 2011) http://www.bankrate.com/brm/news/ob/20040115a1.asp
- Pinsker, Beth. "Why no killer app for paying bills online?" Reuters. Sept. 16, 2011. (Oct. 6, 2011) http://www.reuters.com/article/2011/09/16/uk-us-banking-onlinebillpay-idUSLNE78F02S20110916
- Top Ten Reviews. "Bill Paying Services Review." (Oct. 4, 2011) http://bill-paying-services-review.toptenreviews.com/