The 3 Best Ways to Pay Your Bills for Free Online

Woman paying bills online at home

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Paying bills is not fun, but technology has made it increasingly easy and often free. Paying bills online saves you the cost of postage. It also makes the task easier, since your accounts will be set up and saved after you set up the first payment. This can also help prevent costly mistakes. Since no one wants to pay extra to manage bills online, it's useful to know the best ways to pay your bills online for free and how to set up these services.

Use Online Bill Pay Through Your Bank

The best way to pay bills online for free is probably your bank or credit union. If you have a checking account, it’s likely that your financial institution offers online bill pay as a free service. Paying from your bank means that your bank initiates the money transfer.

The process for how to set up online bill payment services is simple. You'll need to supply your bank with information about each payee (to whom you're sending money) to have the bank send electronic payments (or checks) in the amount and on the date of your choosing. Note that bills paid from your bank require a few days to arrive at your recipient's account. Be sure to check the number of days your bank will take to transfer payment and include that in your planning.

Using your bank is a great way to pay bills for regular monthly expenses like utilities on time while maintaining control over the process. You can have recurring payments sent automatically on a schedule or make one-time payments when the need arises. And if you need to stop paying or pay from a different account, all you have to do is log in to your bank account and make the necessary changes.

But as convenient as online bill pay is, it comes with a few drawbacks. If you initiate a payment without the necessary funds in your checking account, you could incur overdraft fees amounting to around $34 per transaction at large banks and credit unions. Likewise, if you set up a recurring payment and the amount increases, you'll pay less than the full amount owed and may face underpayment fees from the payee.

To get charged overdraft fees, you'll generally need to "opt in" or formally enroll in the overdraft protection service your bank offers.

Pay Bills Through ACH Debit Payments

Sometimes, it's easier to have your payee pull funds from your bank account. This is especially the case if the amount you pay changes every month. Most service providers (i.e., mortgage, insurance, and utility companies) let you pay your bill for free by setting up ACH debit payments. These are electronic payments that move from one bank to another through the Automated Clearing House network (ACH).

With this approach, you supply the service provider with your checking account information and grant them permission to take the money as needed. They'll withdraw money directly from your checking account each time a payment is due (once a month, for example), with no involvement on your part. The modern ACH network allows payments to clear on the same day or the day after they were initiated.

Like online bill pay, ACH debit payments are one of the best ways to pay ongoing bills online and avoid late payments. But it takes slightly less work each month to pay bills via ACH because service providers have direct access to your bank account. As an added benefit, some lenders offer a lower interest rate on loans you repay through automatic debit payments.

The risks of this payment method are similar to those you take with online bill pay, although you have less control over the payment date with ACH debit payments. While rare, payees may accidentally take too much or pull funds at a bad time (when your account is empty, for example), resulting in overdraft charges.

Ensure you have plenty of extra cash on hand or overdraft protection if you use either online bill pay or ACH debit payments. If your finances are too unstable to guarantee that sufficient funds will be in your account at the same time each month to pay a bill, consider one-time payments through online bill pay instead of ACH debit payments.

Use Free Bill Pay From a Third Party

Several financial services companies also offer online bill pay. The service is similar to online bill pay through your bank except you use software or mobile apps to pay bills.

You can set up bill pay in the same way you would online bill pay through your bank by creating a list of payees. You can also have payments sent electronically or by check.

The main advantage of this type of bill pay is that it may be included with a third-party service you already use for budgeting or tracking investments. For example, if you use Quicken for budgeting, it may be more convenient to use Quicken Bill Manager than online bill pay through your bank to make payments online.

That said, this type of bill pay isn't always truly free, or even inexpensive. You may need a premium subscription to use bill pay at no added cost. Or, you may only get free bill pay for a limited time.

However, there are some truly free bill-pay services, too. For example, MyCheckFree lets you pay electronic bills to select service providers at no cost. While the service allows you to make payments to hundreds of businesses, not all companies you do business with may be contracted with MyCheckFree. This means you'll have to come up with alternative arrangements to pay these companies.

Article Sources

  1. Consumer Financial Protection Bureau. "A Closer Look: Overdraft and the Impact of Opting-In," Page 1.

  2. Nacha. "Payments Mythbusting," Page 1.

  3. Consumer Financial Protection Bureau. "Ways to Pay Your Bills," Page 2.

  4. MyCheckFree. "Frequently Asked Questions."

  5. MyCheckFree. "Which Bills Can I Pay Here?"