What is Online Bill Pay?

Online bill pay is a service offered by a range of financial institutions, lenders, financial services companies, and other businesses to pay various bills more conveniently and easily online. Online bill pay is designed to be a service for consumers that makes paying bills not only easier, but also more likely; it offers features that help avoid missed payments and late fees.

While many individual companies offer online bill pay, more and more financial institutions are offering it directly through their online or mobile banking applications. That means individuals can set up online bill pay for multiple accounts—utilities, credit cards, mortgage, etc.—through a single online interface if they so choose. By setting up automatic payments, individuals can help ensure that they never miss a payment.

How does Online Bill Pay Work?

To pay bills online through a financial service provider, all an individual would have to do is log into their bank account online or through a mobile application. They would have to find the online bill pay feature, but with more and more organizations pushing it to the forefront, it shouldn’t be hard to find. From there, they could select a provider they want to pay: their utility company, credit card company, lender, etc. For first time users setting up online bill pay, they would need to enter personal information specific to that account, like their account number, billing address, etc. Then, all they would need to do is authorize their bank to send payments to that company on their behalf.

Many financial institutions will even give the individual the option of sending a direct paper check if they prefer, so the institution ensures the individual’s bills get paid even if their payee doesn’t actually have an online option.

Some banks or credit unions have online bill pay options for free, but to access more advanced options customers might have to pay a fee. That said, it’s usually a relatively small fee.

In addition, setting up automatic recurring online bill pay can be a great option if remembering to pay bills is a troublesome task, in order to free up mental space for other day to day tasks.

How to Set Up Online Bill Pay with a Bank

One may feel ready to set up online bill pay for themselves. There might need to be some time set aside at the outset to set it up, but the time saved down the road will certainly make it well worth the initial time investment. While each bank, credit union, or financial institution may have their own little quirks in the process, future bill pay users generally need to follow the same overall process to make it happen.

First, prospective users will want to gather the information necessary for any accounts, payees, and billers they’ll want to set up automatic payments for. This will usually include account numbers, addresses, and potentially other basic information.

Next, users would sign into their bank or credit union’s online portal and navigate to online bill pay. From there, it’s time to start entering the information for each individual recipient of online bills.

Then they would want to dictate important details about their bills, such as payment timing, recurring vs. one-time payments, and reminders that can be sent from their bank to let them know a bill is about to be paid so they can budget accordingly.

How to Set Up Bill Pay with an Online Service Provider

Setting up online bill pay directly with a service provider can be a bit of a longer process in order to prepare for direct withdrawals for payment (most of the time this would be ACH payments). Often, users would need to provide a voided check—a check that has the main blank areas ‘voided,’ or crossed out so the check can’t be used. This is a means for the service provider to verify the user’s identity and banking information, and gives the provider authorization to withdraw funds directly from the user’s account. Users would probably also need to supply an authorization form with additional info.

Sometimes, service providers will let users pay directly with a debit or credit card rather than direct withdrawals from their bank account. While this is usually faster and simpler to set up, it sometimes comes with additional fees for each transaction—usually a few dollars depending on the payment size.

Other service providers will let users provide their bank account information directly right from the service provider’s website, without having to send a voided check.

Just as with setting up online bill pay with their bank, users will need to specify when they would like bills to be paid each month—or whether they would simply like to schedule a one-time recurring payment.

Choosing from Online Bill Pay Types

Wondering what types of payments a user can make through online bill pay? Here are the most common options.

One-time Payment, Immediate: A one-time payment that’s processed immediately upon submitting it. While the payment may take a few business days to show up in a user’s bank account and the service provider account, it will usually be dated for the day it is submitted.

One-time Payment, Future: If a user wants to set up a one-time payment for a later date, nearly all service providers will let them do so. Users can specify the amount they want to pay and the date they want the payment to be withdrawn.

Recurring Payment: Recurring payments can be set up to be made every week, month, or in some cases a different period. Users can set a dollar amount to be their minimum monthly payment or a different amount.

What does Online Bill Pay Cost?

Usually, paying bills online won’t cost additional feels—however, some service providers or banks will charge a small ‘convenience fee’ or other service charges (ex. monthly subscriptions for SaaS providers). While these fees could be negatively viewed as a nuisance, they can also be viewed in a positive light. Fees can be worth the added cost because of the value-added benefits that come from having bills automatically paid without having to deal with paper checks or continued maintenance and upgrades to the service. That said, it is important to understand the business model of a bank or service provider with regards to online bill pay before signing up.

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