What Is Online Bill Pay and How Does It Work? A Step-By-Step Guide
Technology has become an integral part of our everyday lives. We use computers, smartphones, and tablets throughout the day as a way to communicate, be entertained, and do business. Technology is a useful asset, from the way we shop to the way we find information, even the way we pay our bills. Online bill pay is a service that allows your bank or credit union to automatically transfer money from your account directly to a company to pay your outstanding bill.
When you have several different bills due to different companies, it can be hard to remember when and how much to pay. With online bill pay, you can set up recurring payments for certain bills on specific days. These payments are automatically transferred to the companies that require them so you don’t have to worry about a stack of bills sitting on your coffee table each month. Learning how this technology works can help you to decide if it’s right for you.
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How Does Online Bill Pay Work?
Online bill pay may be offered through your bank or credit union. Generally, banks that offer online banking also offer an online bill pay feature. If your financial institution offers this feature, you’ll be able to register your vendors and schedule payments to be made to these vendors on a recurring basis. When you set up these payments with your financial institution, the money is directly withdrawn from your account and provided as a payment to the company in the amount you specified.
How Do You Set Up Online Bill Pay?
The procedure you must follow to set up your online bill pay may vary, depending on the company you wish to pay and the way your financial institution operates. Generally, to set up bill pay, you’ll need to:
- Log into your online banking account with your financial institution.
- Select the online bill pay feature.
- Add the service provider you want to pay and additional requested information, such as your account number and billing address.
- Choose the date you want to pay the bill and whether or not it’ll be a recurring payment.
- Agree that you authorize your bank to make payments for you.
- Set reminders when your bills are due so you remember when money is taken from your account.
In addition to logging into your account from your computer, many financial institutions also offer smartphone online banking apps. You can usually log onto the app with your smartphone to set up online bill payments.
Why Should I Use Online Bill Pay?
Online bill pay is a great feature offered by many financial institutions. You should consider taking advantage of this service, especially if your bank or credit union offers it for free. You may also want to pay your bills online because it’s:
- Easily accessible.
Online bill pay makes it impossible for you to forget about a monthly charge so you won’t incur late fees or other penalties from companies you do business with. When you set up your online bill payments, it’s also a way for you to review your expenses. Knowing when and how much money is taken from your account each month makes it easier to stick with a budget and reach your financial goals.
Electronic Funds Transfer vs. Mailing a Check
Online bill pay is much easier and more effective than the age-old method of paying bills by mail. With online bill pay, you don’t have to waste money on stamps and envelopes since the money is automatically transferred from your account.
It can take a while for your mailed payments to finally reach the companies that need them. If there’s a delay, you may be responsible for a late payment penalty fee. If you participate in an online bill pay service, you won’t have to worry about late payments. Your payments are already scheduled to be deducted from your account and automatically transferred to the companies you choose, on or before their due dates.
What If My Payment Doesn’t Go Through?
If you notice your online bill payment didn’t go through, it may be due to low funds in your account. Check your bank account and see if you have enough funds to cover the bill in question. It’s important to set reminders for when your online bill payments are deducted from your account. This way, you can check your balance to ensure you have enough money to cover the bills.
If you’re sure you have enough money in your account for the bill, there could be an issue with the company you’re trying to pay or the settings on your online payment account. Be proactive and contact both the company and your bank to resolve the issue immediately. If you wait until the next month to see if it happens again, you could incur late fees from the company since your payment was already late.
Is Online Bill Pay Safe?
As with many online banking features, you may have concerns about cybersecurity. In most cases, your financial institution has protections in place to ensure your privacy and security are maintained when paying bills online. However, to ensure you stay safe when paying your bills online, it’s important to protect your identity and money by:
- Only making payments through vendors you know and trust.
- Being mindful of the website you’re using by reviewing the site address.
- Paying bills with a credit card or secured account, such as a PayPal account, if possible.
- Not providing payment or identification information by email.
Online bill pay is a convenient way to ensure your bills get paid on time every month. It’s also a helpful way to keep track of your finances. If your financial institution offers online bill pay, consider signing up for this feature so late payments can become a thing of the past.
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