Online Bill Pay

Highlights

  • Bill pay services are easy to set up and use, whether online or with an app.
  • A bill pay service helps you stay organized and avoid unnecessary fees.
  • Bill pay services allow to categorize and analyze your spending habits.
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Use an Online Bill Pay Service to Avoid Problems and Gain Insights

You know the story. You go your mailbox, get the mail, and you have two things: junk mail and bills. Who still gets personal mail?

The junk mail goes into the trash (recycling, I mean) leaving you with bills. Paying bills is something you do regularly. You get a bill any time you spend money, if you don’t pay for it with cash or check.

Most bills are paid monthly: mortgage or rent, credit cards, auto loans, student loans, personal loans, utilities, cable, internet, cellphone. Even some bills that are due annually, like auto insurance, can be split into monthly payments.

Get to Know Your Bills, They Have Things to Tell You

You probably don’t want to spend a lot of time thinking about your bills. Pay them, and move on. But, it is important to pay attention to your bills. How you handle your bills has a big impact on your overall financial health.

If you are not organized in the way you pay bills you set yourself up for a lot of trouble.

Throwing Money Away

Have you ever paid a late fee on a credit card or other bill? There are two main reasons for being late. You can:

  • Forget to pay a bill by the due date, when you have the money to pay it.
  • Be unable to pay it when it is due, because you don’t have the money.

Not paying a bill when you have the money is self-inflicted injury. Most creditors are going to charge you a late fee. Paying a late fee when you didn’t have to is like pulling money out of your wallet and throwing it out the window. It’s actually worse. If you threw it out the window someone else would find it and be happy (If you’ve ever found money on the street, you know that it feels real good).

When you pay a late fee, the company gets it, and they get enough of your money already. Late fees vary based on the company or creditor and the type of account. Looking at two big cell phone companies, Verizon charges $5 and AT&T $9. Better you have that money than they do, but a penalty that small is basically a nuisance.

A Small Mistake Can Cause Big Harm

For some bills, the consequences are more severe. Being late on an insurance policy likely cancels your coverage. For a credit card, being one day late can cause a substantial late fee and a hike in your interest rate. I just pulled out my most recent Citibank credit card statement and it says “you may have to pay a late fee of up to $39 and your APRs may be increased up the Penalty APR Of 29.99%.” Ouch. The minimum payment due on the bill was $25 and they can smack you with a late fee that's 60% larger, and hike your interest rate, just for being one day late!

First Time Late With a Bill?

Most creditors and service providers will waive a late fee for customers of a year or longer who haven't been late with that company before. Ask the customer service representative, courteously, if  you can get one “freebie.”

Easy Fix - Protect Yourself With an Online Bill Pay Service

Using an online bill pay service is a great way to protect yourself from paying late fees because you spaced out the due date. There are number of different types of bill paying services you can use.

Almost every bank or credit union checking account has easy-to-use bill paying features. Best of all, banks and credit unions offer these services for free if you have an existing checking account. They want you to keep money with them, and providing a bill pay service that is easy to use is an incentive to continue banking with them and not take your business elsewhere.

Set Up Bill Pay Quickly to Pay Most Bills

You can set up and then use a bill pay service at the bank or credit union’s website or you can use their app. It takes a minute or two to set up and then another minute to add each creditor or service provider you wan to pay. Have your most recent bill handy for any bill you want to enroll in the service. You will need to enter the mailing address where checks are sent for people who mail in payment. The bill pay service uses that address to make sure your payment gets to the right place.

You can pay most of your bills this way: credit cards, retail accounts, utilities, cell-phone, gas cards.

Use Recurring, Automatic Payments to Avoid Fees

If you use a bill pay service properly, you will avoid fees from any company that sends you a bill. For a credit card, or other bill that gives you a serious spanking if you are late, you can set up a recurring payment in the amount you usually owe for a minimum payment. It is wise to set it to arrive two days or so before the due date. This way, you can be sure not to get hit with a late fee and interest rate hike. The bill-pay service allows you to make more than one payment a month to the same creditor, so you can pay the remainder of the statement balance by the due date, to avoid interest charges.

Of course, you need to have money in your account to cover the payments you schedule. Most services will notify if you that you don't have enough funds in your account to cover an upcoming, scheduled payment.

Many bill pay services guarantee your payment will arrive by a certain day, if you schedule it with enough time in advance and have the funds available. The bill pay services usually take two days to post to the company you are paying. Don't wait until the day the payments is due. Many bills can't be paid the same day, but if the option exists, expect the bill pay service to charge a fee.

Stay Organized

If you have problems being organized, a bill pay service should be a huge benefit. You can view statements, check due dates, and set reminders. It will save time, reduce paperwork, and keep an easy to access record of all your transactions. Online bill-paying simplifies your effort, but you still need to pay attention and monitor your accounts to ensure timely payment of your bills and prevent late fees.

Many bill pay services guarantee your payment will arrive by a certain day, if you schedule it with enough time in advance and have the funds available. The bill pay services usually take two days to post to the company you are paying. Don't wait until the day the payments is due. Many bills can't be paid the same day, but if the option exists, expect the bill pay service to charge a fee.

Do It All in One Place

You don't have to use a bank or credit union to pay bills online. Most companies let you pay your bill at their website or using their app. Nothing wrong with that. The advantage of using your bank or credit union’s website or app to pay your bills is that it makes bill paying a one-stop experience. If you have bills that your bank or credit union doesn’t pay through their bill-pay service, you can instruct the bank to send a check to arrive by a certain day (build in a safety factor of a couple of days). You can set this kind of bill payment up as a recurring, monthly payment or as a one-time payment. I pay my landlord this way. Easy-peasy. No stress, no recurring effort.

Too Many Bills Due Around the Same Time?

Do you know that most credit card companies let you change your billing date to the date of your choice. You can request a new billing date online or by phone.

Too Many Bills, Not Enough Money

If you can't pay your bills on time because your expenses are greater than your income, the benefits of online bill paying are limited. It still saves you time. The organized way that you can view your bills also makes it easier to prioritize what you pay and when. Pay attention to the penalties and fees you will incur for being late, and work hard to not be late for the bills that punish late payments most severely.

Minimize Credit Harm

If you are in a situation where you can't avoid being late on a bill, think about how falling behind harms your credit. For any debts that report to the credit bureaus (credit cards and personal loans, auto loans, mortgages, and student loans) they don't report you as late unless you fall 30 days behind. Work hard to avoid being 30 days late, as one late payment hits your score hard.

Steps to Take When You Can't Pay Bills On Time

Falling behind on your bills is stressful. The problem won't go away on its own. Here are some basic steps you should take.

  1. Inform Your Creditors. Call any creditor if you are going to be late. If you can't pay because you lost your job or have a serious illness, tell your creditor and be prepared to supply proof. Ask if they have any kind of hardship program.
  2. Review All Expenses. Do you have a budget? Do you know where you spend your money? When you can't pay your bills on time, it's time to cut expenses, eliminating any you can and finding was to spend less on necessities. Food costs are a great place to start. You probably can eat healthy and satisfying meals for less money than you spend now. Cut out restaurants until you are caught up on your bills. Shop around for car insurance, cell phone, internet and get rid of cable.
  3. Put a debt pay off plan in place. There are a number of different ways to work on paying off your debts. Use the Bills.com Debt Pay Off Calculator (directly below) to find a solution that is based on priorities you set and has a monthly payment you can afford. 
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