Tuesday, January 20, 2009

Eight Great Reasons Online BIll Pay Works for Me

BeingFrugal.net has a post up right now on a subject that is near and dear to my heart - online bill pay. I love my online bill pay so much, and am so likely preach its advantages to anyone who will sit still long enough, that I am quite surprised I haven't written about it before! Being Frugal lists a number of great reasons why paying bills online is awesome, so instead of copying her post, I am going to tell you how it effects me.

At my company I am paid twice a month, on the 7th and the 21st. So, what I do is divide my bills up. Anything that is due between the 8th and the 20th gets paid with the money from the 7th, anything due from the 21st - the 6th of the next month gets paid out of the 21st check. Basically, bills due at the end of the month or the first of the month come out of the 21st, bills in the middle of the month, get paid out of the 7th. See how confusing this is? This is part of the reason I love online banking - once I get it set up, I never have to worry! I used to sit down with my checkbook every payday and write out checks - but there were two main problems with this system: 1) Sometimes I would get really busy and not have time. Let's say a bill is due on the 23rd of the month. I would normally pay that out of the paycheck I got on the 21st. However, that doesn't leave me a lot of room. If I had a really busy day or was sick or something and didn't have time to mail checks that day, my payment would be late! 2) The other problem was that I didn't like the fact that bill collectors could earn interest on my money if I sent it in early... I should be the one earning interest! Here's another example: say a bill was due on the 6th of the month. I would write the check for that on the 21st. Sure, the payment would be in early, too but early! It would be almost two weeks ahead of time that they would have my money - when it could be in my bank account earning me interest.

Online banking solved both of those problems for me. I use the system through my credit union (which is free, I might add) and go in and put all my bills in there. For most typical transactions, it takes only 2 days for the money to go from my account to the creditor. So, I can go into my online bill pay the day I receive a bill and set up to be paid. That means that in the first scenario it doesn't matter if I am sick or busy on payday, the credit union will automatically make sure the bill is paid on time. In the second scenario, I can set the payment out so it goes out just two days before it is due - meaning the money has the maximum amount of time in my checking account. It's a beautiful system! Not only that, but the credit union guarantees the money will be there or they will fix the problem. I tell you, I never got that guarantee from the U.S. Postal Service when I was mailing checks!!

I use online bill pay for all my bills including the ones that are the same amount each month, like my mortgage, to ones that change each month, like my electric bill. For the bills that are always the same, I set them up on a cycle so they pay each month at the same time for the same amount. I then let that run for a year. In December, I reevaluate as sometimes the amounts will have changed. For payments that are different each month, I pop online each time I get a bill and set up the payment. So, when my utilities bills come in I just take 5 minutes out of my lunch hour to set up a payment. Easy peasey.

I can even use online bill pay for writing checks to individuals. For example, when I was separated from my ex husband we still had some joint bills, like auto insurance. I would set up a check to go out to him sent right through my bill pay system. A warning - nontraditional checks like these took more like a week to go out, so I had to plan for that, but the bill pay system tells you when the money will arrive, so you can make those adjustments. Here's another one - at that same time I was living in a tiny apartment in a home owned by a woman who lived down the street. Rather than worrying about making sure she got her rent on time, I would simply have the bill pay system handle it - and I never had problem one.

Oh, but I am not done yet...

Being Frugal mentions the cost savings of not using stamps and one of her commenters mentions the cost savings in writing checks - I can attest to that! I only use stamps for birthday cards, and if you looked in my checkbook you would see I write "maybe" a check a month - if that! I haven't bought checks in so long that they have my married name on them, and the address of the home that I moved out of for a year... and then back into!

The other thing that I love about online bill pay is that all my bills are in one place. I know a lot of people pay their utilities bills or what-have-you directly on that creditor's website, but I am not fond of that. I like the ability to log in whenever I want and see all my bills, plus how much is going out and when, all in one place. I am sure arguments could be made for the other way as well, like for people who pay for everything with credit cards to get the maximum amount of rewards as in my buddies Budgets Are Sexy and Passive Family Income but I'll be honest with you - paying all those bills with credit cards gives me the willies. Then again, I am working my tail off to pay off credit cards, were that not a problem, I could see how this could be a good way to earn rewards. In any case though, I would probably stick with my online bill pay because I just love seeing everything all laid out for me.

Here's another thing - I've had friends of mine say they don't use online bill pay because they have sporadic income and don't want bills to go out if they don't have the money. To that I say that they should really check out their online bill providers - mine will not send out a payment if I do not have enough funds in the account. This happened to me awhile back, a check hadn't cleared and I had dipped a bit lower than I had planned. My online bill system sent me an email warning me and then did not send out the bill until the following day. And guess what? There was no fee doing this for this.The fact they let me know was a huge relief! I was able to transfer over a bit from my savings and have the bill go out the next day - no overdraft fees were charged, no late fees incurred! In fact, I haven't had a late bill in years - it is part of the reason I have an outstanding credit score.

But, oh - I am not done yet! As I said, I am working hard to eliminate that credit card debt. With online bill pay I can make an additional payment in a snap! I usually pay $75 a month on my card, but last month when I had a windfall, I made an additional $250 payment. It took me less than 5 minutes to do and I didn't use a stamp. In the past I would have either hunted down a past statement for the correct address, account number, etc. or I would have waited until the next statement... except by then I would have gone shopping or out to dinner a few times and then suddenly I didn't have as much to send in as I did before! This might not be as big of a problem now that I have better money management skills, but it sure was helpful in preventing impulse purchases when I needed it.

So here is a wrap up of why I love online banking:

1. Ease - It is so simple to set it up and I can do it at any computer - no hauling my checkbook and a file folder full of bills and stamps around to get my bills paid.

2. Reliable - I know when it first came out some people had some problems, but I have been using it for years and never had an issue. They guarantee to take care of it if there is.

3. No stress - I used to worry a lot about bills being paid on time and so forth. Now I set it up and forget it. No worries.

4. Fabulous credit score - I attribute a big portion of my high credit score to the fact that I never have a late payment.

5. Saves money - I have saved so much money in not buying stamps, checks, return address labels, envelopes, and in not getting late fees and overdraft fees. It still amazes me that online bill pay is actually free!!

6. Helps my budget - All my bills are in one spot - I can log in an see in a glance what has been paid and what is scheduled to be paid. Having it all together helps me know how much I need in my account at any one time and since it is connected to my checking account, I can easily verify that everything is moving along as it should.

7. Encourages Bill Pay - Making extra payments on debt it so easy, it encourages me to actually do it - rather than blowing a windfall on something I shouldn't and would later regret.

8. Helps Me Earn Interest - Because now I pay bills when they are due, and not several weeks beforehand, money stays in my account longer, meaning I get the interest - rather than someone else.

So, what's not to love?

EDIT: (added a couple days later) I found another reason to love online bill pay. Credit card companies are radically shortening the time you have to pay your bill. I just received an American Express bill that closed out on the 12th. I got it on the 15th. It is due on the 27th. It was due just 15 days after they mailed it out! With holidays and postal delays, it would be pretty easy to end up with a late payment. Fortunately my bill pay was able to have it there in two days.

Photo by: athena1970


Budgets are Sexy said...

ooooh i have a soft spot for online bill pay too!!! hell yeah i like my credit card, but unfortunately not everyone takes them ;)

soooo, for those suckers i set up my online payments and i'm good to go! i can't do any of them automatically as yet since our paychecks dates change a lot, but sending them are only a few clicks away anyways!

Kristy @ Master Your Card said...

And just in case these reasons aren't good enough for some, I'll also add in the security factor. For those who are going to individual creditor's websites, you're subject to their security systems. Most of them do no more than the 84-bit encryption required by law and that's it. To do more costs more. We've all heard the horror stories of retail chains that have been hacked. Why not protect yourself even more?

Most banks and credit unions go up to 128-bit encryption for added security. This usually means that that data is ridiculously scrambled from your end to the financial institution's end so that it makes it extremely difficult for would-be thieves to actually get a hold of your information. My credit union even offers the option of MFA (multi-function access) which requires more than just a user id and password to sign in.

If you're nervous about security, you're better off with your online bill pay, so I recommend sitting with your banker to learn more.

Dawn said...

J. Money - Glad to hear you are a fan too! I love how easy it is.

Kristy - Wow. That is an incredibly good point. I hadn't thought of that at all. Thank you so much for pointing out the security issue - one more item I can add to my arsenal when I start preaching the benefits of online banking.

Miss M said...

I pay most of my bills online but not through bill pay, I just log in and pay them directly. You have to pay for bill pay through my bank and I see no reason to pay money for something i can already do myself. Only my mortgage has to be paid by check.

Dawn said...

That is too bad your bank charges Miss M! If you ever decide to look for a new bank, keep it in the back of your mind. I don't think most credit unions charge, but that may just be my experience on my end of the world.

Anonymous said...

I recently re-discovered online bill pay, within the last year. I was one of those people that got seriously burned when it was first offered through Fleet Bank. (I cancelled all recurring payments, but their software had a glitch, and you had to call them to cancel. Only, no where did it tell you that.)

I digress...I love not having to worry about late payments, stamps, etc.

Like Dawn, my checks have my married name on them, 15 months after my divorce. The day care center just asked me about that....

I do have a couple that are scheduled through the companies website, like my auto-insurance, because I get a discount doing it that way. But everyone else is scheduled through the bank.

Great post!!!

Dawn said...

Thanks Oceankarma! Sorry you had problems when it all first started. I remember hearing about what a nightmare that was. Fortunately, the bug seem to be worked out (knock on wood) and I have been thrilled with my online service.