When the history of the last 30 years is written, and the most important inventions recognized, online bill-pay will surely be at the top of the list.
OK, maybe not, but for me at least, online bill-pay was nothing short of a miracle when I first started using it in the late 1990s. See, I'm not exactly disorganized, but I do have a little trouble with paper. It escapes my best efforts to file it and seems to delight in staying jumbled. And despite these best efforts, sometimes bills would go missing ... and sometimes I'd end up paying late.
But with online bill-pay, I always know what I owe and when it's due. I can choose to automate my payments or set them up manually in seconds, timing them to optimize my cash flow over the course of the month. It's brilliant, simple, and exactly the kind of activity that makes great use of the Internet.
Yet only 28% of adults in the U.S. prefer to pay their bills this way, despite numerous studies showing that online bill-payment is at least as secure as doing it the old-fashioned way. Here's how to join them.
Generally speaking, there are a few ways to pay a bill online:
• Have the company billing you auto-debit your bank account. The bill always gets paid on time, as long as you have money in the account. Downside: You probably can't control the timing of the transaction, which isn't a big deal for small recurring bills, but isn't so good for large bills or bills that may vary significantly from month to month. And it's also not good if you have a tendency to live paycheck to paycheck.
• Pay directly at the website of the company billing you, via a credit or debit card. This is simple and free, but not convenient, and you lose the benefits of automation and centralization that you'd get via a bank-based system.
• Pay via an online bill-pay system offered by a bank, a brokerage, or a third party. For me, this is the clear winner. Read on to see why.
Nearly every financial institution with a Web presence offers some sort of online bill-payment system. If you have an account with a bank or a discount brokerage -- E*Trade
Paper or paperless
With a bill-pay system, you can make payments in two different ways -- via an electronic fund transfer, for companies that offer such a system, or via an automatically mailed paper check for everyone else.
Let me emphasize that second point, because it seems like lots of people don't know this: With online bill-pay, you can pay anyone, whether they accept online payments or not. Utility company? Yep. Credit card provider? You bet. 20 bucks a week to Great Aunt Millie so that she can play high-stakes bingo every Thursday? Yes, indeed -- all automated and timed to arrive a day early so that she can get to the bank.
And if you use Quicken or Microsoft Money to manage your personal finances, this whole deal is a complete no-brainer -- you can usually set things up so that the bank automatically updates your register (yes, the one on your hard drive) automatically. How's that for Foolish recordkeeping?
Seriously, if you're not paying your bills online, you really ought to consider it carefully. You can learn more about online banking options in our Foolish Banking Center, and if you still have questions, take 'em to our Online Banking discussion boards. And for more great personal finance suggestions, check out the Fool's personal finance newsletter service, Motley Fool Green Light. Every month, Dayana Yochim and Shannon Zimmerman serve up hundreds of dollars' worth of money-saving tips, guaranteed. And the members-only message boards are always open for your questions and concerns. Check it out today. It's free for 30 days with absolutely no obligation.