| By Erica Ho How to Stop Worrying and Start Saving Time and Money with Auto Bill Pay and Online Banking
Photo by xJasonRogersx. Below we'll walk you through how to set up automatic bill paying, then detail a system of email and/or SMS alerts to make sure you stay on top of your bills and finances with minimum effort. Note: Automatic bill pay is definitely not new, but the time- and money-saving service is something we've heard a lot of misconceptions and confusion about from readers. Not all auto bill-pay tools are the save, but we're providing a general overview of the most basic features. The specifics of your particular bank's online system may vary and be slightly different. The Advantages and DisadvantagesOnline bill pay is usually free for most customers and included in your bank account by default, as is online banking in general. It's a great way to go paperless, and offers a great option for paying your bills on time automatically each month, losing most of the worry. The biggest problem with online bill pay is that it's easy to let your finances fall by the wayside, and to forget to scrutinize your bills. Even worse, you could incur overdraft fees if you're not careful. Cut Down on the Paperwork and Worry Automatic online bill pay can set up recurring payments online (often on the due date, or on a specified date), so that you don't have to worry about the bills coming in each month or ever being late. They're automatically taken care of for you. Potential Problems Perhaps the biggest problem with automatic bill pay is that some people become so reliant on the automatic system to take care of bills for them that they don't always realize when they don't even have sufficient funds in their banking accounts to cover their bills. Below we'll address a simple set-it-and-forget-it system for making sure these problems aren't an issue. Recurring Payments Pay Bills AutomaticallyMost, if not all, services allow automatic recurring bill payments. You'll want to check to see if your particular online bill pay system is able to do this. The exact procedure varies from bank to bank, but the concept is the same. There are often two ways to set automatic bill pay through the bank: first, you can sign up for merchant e-Bills, or second, you can add a payee and schedule monthly payments.
When setting up a payment schedule for either payees or e-Bills, you'll have a variety of options. Payment frequency can be set to monthly, weekly, or daily using a fixed or variable amount. (Through e-Bills, credit cards often get the nice added flexibility of a variety of payment options: you can choose to pay your minimum payment, a fixed amount, or often, your total balance each month.) If it's not possible to set it up directly through the bank's online banking system, most merchant web sites offer alternatives. Wireless providers, for instance, give the option of recurring payments and will debit the bill through your debit/credit card or bank account. Payment schedules, through the bank or merchant, can be set for any day you like—but I've found that setting all my bills to be either paid right away or during a particular time in the month helps keep me track of my bills better. Use Your Email Inbox as an Alert SystemBy keeping your email inbox as an informal to-do list, email alerts are a great way to make sure you haven't forgotten anything. Often available and customizable through your bank, you can use it as a safeguard against overdrafts and other fees. Have your bank alert you to low balances in your account, send you bill reminders, and notify you when a payment has posted. Treat these emails not as if you've already taken care of these bills, but like you haven't. When an alert comes through on a payment, open up the email and look for verification that payment has been scheduled for a certain date. If not, check online bill pay immediately. When you're done with the bill, delete the email in your inbox. If you want to come back to it at a later date for some other reason, star it, mark it as important or keep it as unread so that it is in your inbox waiting for you the next time you login to your email again. Have Mint Remind You Again
Alerts (which are accessible on your personalized home page) are tweakable to your liking. Mint can alert you if any of your account balances fall below a certain amount, if an upcoming bill is due, and catch all of those little fees that your bank won't alert you about.
Combining bank and Mint alerts is particularly useful. For instance, when I get slammed by a fee, I know right away and open up my bank statement to look things over to make sure things are accurate. Setting up bill reminders (even if your bill is already scheduled to be paid automatically) encourages you to double-check the payment before it goes out. The payment ends up being checked on two different times of the month to accommodate for possible (situational) changes, so they can be tweaked if it's needed. Set Up A Different Account for BillsAnother option to prevent overdrafting is to set up a different account for bills only. This account would differentiate in your checking account in that it would not include discretionary cash (your main account). Set up monthly transfers between your main account and this account, and make sure there's enough each month to cover your basic monthly non-variable expenses. (Always make sure there's some cushion!) Since rent, utilities, and etcetera are often fixed costs, it's not hard to get an idea of exactly how much you need each month. It's probably a better idea to keep the accounts that pay your credit cards separate from this main monthly account (unless you like to pay your bills via credit card). This, of course, depends on your spending habits and how you like to organize your finances, but if your shopping varies monthly (and you use your credit card for shopping) it's better to keep your credit card tied to this discretionary cash pool. Then, of course, you'll want to make sure you pay off the balance each month. Vigilance Is KeySetting up a system where you're encouraged to double-check automatic payments is key. You don't have to go through the hassle of paying the bill—you just need to check to see that it will be paid, which takes less time and headache. Automatic payments are great for reducing worry and eliminating late payments, but it's a good idea to still get in the habit of reviewing your statements from time to time to make sure everything's not off-kilter. Used online banking? Let us know your feelings, thoughts, and financial fiascos using automatic payments in the comments below. View comments »
| May 24th, 2010 Top Stories
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Online banking and automatic bill pay is extremely convenient—but it's also something that a surprising number of people don't take advantage of. Let's look at how to set up an automatic system while making sure you incur no unnecessary fees.
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