Automatic Bill Pay
Checking and savings accounts come with all sorts of new, very convenient, options. However, if not managed correctly, these modern conveniences can lead to big-time fees, and can end up costing you money.
One of the most deceiving conveniences is the automatic bill pay option. You can usually set up automatic bill pay through your bank or through the creditor (utility or credit company). The biggest problem with automatic bill pay is that if you don’t have the money in your account when the payment is deducted, your bank will charge you an NSF fee. So, even though your creditor may offer you a discount for signing up for automatic bill pay, you’ll pay a lot more in the long run if you aren’t careful.
Making bill payments online has become possibly the most convenient way to pay your bills. Set everything up for automatic bill pay and you’ll never suffer through piles and piles of paper statements again. Problem is, bill amounts can vary. If you aren’t careful, you could rack up hundreds of dollars in NSF charges.
If you are careful to monitor your bills and always deposit your payroll check into your account diligently, automatic bill pay might be for you. However, if your bills vary greatly month to month, if your income varies, or if you have surprise expenses, you might not want to use automatic bill pay.
Instead of using the automatic bill payment option, you might want to try paying on your own schedule. Instead of signing up for automatic bill pay, have your bills sent to you for payment via email or snail mail. Then log on to your bank or creditor’s website and click to pay. This way, you can control when your bills get paid and how much you pay.
Online Check vs. Credit/Debit Card Payments
If you elect to pay your bills through the creditor’s website, you’ll probably be give three options – online check, credit card payment, or debit card payment. Each of these has its benefits and its drawbacks.
An online check is just like writing a check, but submitting it online rather than mailing it. Your creditor will deduct the amount of your payment directly from your checking account. This can take a few days to process, but is generally free.
Using a credit card to make an online bill payment may come with a fee. Some companies (primarily utility companies) charge as much as $5.00 to complete a credit card payment. This means that you’ll pay the amount of your bill, plus the additional fee to make your payment (in this instance, we’re talking about using your bank debit card as a credit card. Read the article on the difference between credit and debit cards to learn more).
Using a debit card to make an online payment is an option that might come with multiple fees. First, you may pay a fee charged by the creditor to make the payment, and you’ll likely also be charged a fee from your bank because, technically, using your debit card to make an online bill payment is the same as using a foreign ATM. Using your debit card to make an online bill payment is probably the least appetizing, and affordable, option.
So, how do you decide?
Ultimately, you’ll need to weigh the speed with which you need the payment to be posted with the cost of making the payment. If you will be charged a $3.00 fee for paying online with a credit card, but will incur $30.00 in late payment fees and/or over-the-limit fees, it’s a better choice to use your credit card. If your payment isn’t due for another two weeks, use the lowest cost option – generally an online check.
Note: the fastest way to get a payment credited to your credit card or utility account is to pay through their website. Your bank may take one to three days to process and send an online payment.