How Does Online Bill Pay Work?

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Man paying bills online
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Online bill pay services offer a convenient, safe and inexpensive way to ensure that your bills are paid on time by setting up an account to make one-time or recurring payments. If you have bills from several different sources—and most people do—online bill pay is worth the time and potential to set up. The source of funds for the payments is usually a checking account, but some bill pay services also work with credit cards. All bills and transactions are accessed and processed through the bill pay service website.

The Cost of Online Bill Pay Services

Many banks offer this service free to their customers. Ask a financial institution with which you currently do business whether they offer online banking

There are also unaffiliated free online bill pay services, which can be a great idea if you only pay two or three bills each month, and they typically don't come with many special features. If you want more of these features, such as the ability to view several months' worth of bills online, you might prefer to use an online bill pay provider that charges a monthly fee. This cost is worth it for most people because they find it actually saves them money by eliminating the expenses associated with postage and purchasing checks, not to mention their time.

Electronic Funds Transfer vs. Mailing a Check

Payments can be sent from your account in two ways: electronic funds transfer or a paper check. Working with companies who will accept electronic payments can create a seamless online payment arc. Online bill pay services can also usually cut and mail a check in situations where electronic payments are not accepted. Be sure to allow extra time and plan ahead—usually five business days—for the check to be cut and mailed.

Will My Data Be Protected?

Yes, online bill pay is perfectly safe. Transactions and other personal and financial information are heavily encrypted to prevent theft and fraud. You can also follow some simple tips for paying bills online to make using these services even safer. For example, a good rule of thumb is to avoid clicking on payment links from an email. Always log onto the online bill pay service directly through a web browser, using your unique login and password.