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You Don't Have to Pay to Pay Your BillsSep 30 '00 (Updated Oct 22 '00) Write an essay on this topic.Recently, there’s been a lot of hype about many online bill payment services. While these services can be a convenient way of paying your bills from one interface, this method does require a little effort and often a monthly charge. For over 2 years, I have paid my bills a much easier way – by automatic electronic debit from my checking account. Those of you epinions purists may realize that this epinion is slightly off topic, but I hope you won’t NR me for that since this seems to be the most appropriate category for this epinion. First, the overhyped web bill payment services These services, such as the one offered by the post office (USPS eBillPay), PayMyBills, and those offered by many banks, are relatively convenient to use. Usually, the person using the web bill payment service goes through the initial process of telling the service who to pay, and if the payment is constant and recurring, when and how much to pay. Those services, such as the one offered by PayMyBills, even allow the user to see all his or her bills online, in one place. Once the person completes the initial process, all he or she has to do to pay bills is log onto a website once a month. The user instructs the service to pay whatever variable payments need to be made (such as to a credit card company, utility, etc), and set up new payees if necessary. The service then withdraws funds from the user’s bank account, and distributes them as instructed to each payee. Payments are made electronically, or if the merchant or person is not set up to accept electronic payments, the service will then usually issue a paper check on the users behalf. The cost of this type of service ranges from free at some online banks to nearly $10 in some instances. This can seem very reasonable, especially since the service is convenient and saves the user the cost of stamps and checks. However, there is an additional hidden cost, especially if you earn interest on your checking account. Users often have to initiate payments 5 or more days in advance. When the user instructs the service to pay a bill, funds are withdrawn from his or her account, but aren’t paid to a merchant for that 5 day float period. This allows the bill payment service to pick up some interest while they conveniently “hold” your money. While these services are usually reliable and a pretty cool idea, I feel that most people don't even need them (and their cost). Most of us can be better served by another option, one that I quite happily use. Automatic Debit - the Cheap, Fast and Easy Way to Pay Your Bills Almost all major businesses are able to accept electronic payment directly from your bank account. To set up this kind of service, all you have to do is fill out an authorization form provided by the company you want to pay, along with a voided check. The company then withdraws funds from your bank account on the due date of the bill each month, rather than a few days beforehand. The best part about this service is that it’s free--a good bank doesn’t charge for automatic debit payments, and a good merchant doesn’t charge either, since this method of payment saves both businesses a lot of money over processing a check. I’ve been paying my bills this way for over 2 years and have never had a problem with a lost or late payment. Simple cases In the simplest cases, you don’t even have to worry about paying your bill. All you are required to do is have enough money in your account when the company you want to pay withdraws it. You still receive a bill each month, that way you can review it to check for errors and you will know when and how much will be withdrawn. I have chosen this option with my phone, electric, auto and renters insurance bills. More complicated cases For more complicated cases, you may need to specify how much you want to pay each month. For example, I pay my American Express credit card bill by this method each month. Since Amex doesn’t know whether I want to pay my minimum payment, entire balance, or something in between, I have to go to their website about 3 days before the bill is due and let them know how much I want to pay. I do this with another credit card bill as well. In both simple and complicated cases, automatic payments can be stopped, usually with 3 days advance notice to your bank. The service can be cancelled altogether with a month’s notice to the payee. Other Benefits In addition to the fact that paying your bills by automatic debit is very easy, you may be able reap other benefits by using this method. For example, many lenders will give users of automatic debits a small discount on a loan's interest rate. My insurance company waives the $3 monthly fee they normally charge for their extended payment plan if you sign up to have your bill paid automatically. Imagined and Real Drawbacks I was discussing this issue with a friend of mine the other day, and he stated that he is very reluctant to give out his checking account information to anyone. This is a common concern; however, people with this concern should realize that every time they write a check, they give away all the information a devious individual needs to withdraw funds from their account. It’s all in the magnetic strip of numbers at the bottom. There you can find your account number, your bank’s routing number, and the check number. In fact, it is probably more secure to authorize automatic payment; if you are sending a check every month, then every month it’s possible that your check will fall into the wrong hands. With automatic payment, that is possible only once, when you send the voided check. A real drawback of this service is that if the person or merchant you want to pay cannot initiate electronic debits, you must continue to pay them by traditional methods. Also, for more complicated cases, such as credit card payments, there isn’t a single interface like that of the web bill payment services. However, I go back to the fact that this service is free and funds aren’t deducted from your account until the very last day they are due, so you can earn a few more pennies in interest each month on each payment. Add that to the fact that you don't have to pay for stamps or checks and you can save a substantial amount of money each year!  |
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