What Is Bill Pay and How Does It Work?

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Updated on Thursday, November 19, 2020

Bill pay services allow consumers to pay their bills via an app or a website. Instead of writing a check and sending it in the mail, you can simply use your computer or smartphone and make the payment online. These services can be convenient to people who want to make bill paying as efficient as possible, with features such as automated payments, reminders about payment due dates and more. Here is what you should know about bill pay service and how it works.

What is bill pay?

Bill pay is a convenient service offered by many banks and credit unions. This service allows you to organize all of your recurring bills in one place and pay them automatically. So instead of paying your rent on one site, your credit card bill on another, your electric bill on another and your phone bill on yet another, you can use your billpay service to take care of all of your bills at once. You can also use bill pay to make manual or one-time bill payments as necessary.

Along with banks and credit unions, there also are third-party companies that offer bill pay services. Quicken Bill Pay, Mint Bills and MyCheckFree are just some examples of third-party bill pay services you might choose to use.

How does bill pay work?

The process for online bill pay is pretty simple overall, no matter which financial institution you are working with. One of the key choices you will make is whether you want all of your bills paid from one site automatically, or if you just want to use the service for one-time payments as needed.

You also might decide you would rather pay each bill manually rather than automatically, if you feel that would help you keep a better handle on where your money is going and when. However, you can often have email or text alerts set up that let you know when a bill is due and when it has been paid automatically, so you can easily keep track of every payment for your records.

Many bill pay services allow for plenty of customization. At Wells Fargo, for instance, you can set up autopay, keep track of when to pay your bills, view your payment history and even receive eBills from companies that offer them. You can also add new one-time and recurring payees at any time.

Pros and cons of bill pay services

Pros

  • It’s convenient: Bill pay services can organize and pay all of your bills in one place, making things easier on you. Instead of having to go through different sites and apps to pay and monitor your bills, you can simply log onto your bill pay provider and do it all from one site if you so choose.
  • It provides a digital trail: When you pay your bills online, a receipt/record is typically automatically generated. This can be helpful should you forget if you paid a certain bill, or need proof that a payment was sent to a specific company.
  • It helps you avoid fees: One easy way to avoid late payment fees is to set up automatic bill payments via your bill pay service. When bill payments are automated, you can never simply forget to pay a bill.
  • It’s environmentally friendly: When using automatic bill pay, you can completely avoid writing physical checks and going the old-school envelopes and stamps route.

Cons

  • It’s not always fast: While most merchants accept online payments, some may not. For example, many landlords still only accept paper checks. If your merchant or payee does not accept electronic payments, you can have your bank or credit union send a check to them. In this case, you should schedule payments at least five business days ahead of time to avoid being late.
  • It can lead to an overdrawn account: Automatic payments can sometimes lead to unexpected fees. If you lack the funds in your bank account to cover a payment, you could get hit with fees. So always make sure you have enough in your bank account to cover your payments due.
  • It doesn’t automatically cover changes to bill amount: If you have a bill that fluctuates but you have your automatic payments set to a static amount, you could be in danger of not paying off your balance. You could also get hit with late fees if you’re not paying attention to the fluctuation of the bill.
  • You may have some security concerns: Some people may have concerns about paying their bills or banking online, as there is the potential for hacking to occur, which is not the case with the old-fashioned, stamp-and-envelope route. However, online banking and financial transactions are extremely common now, and sites use security features such as complex passwords and multifactor authentication to help secure your information. Although it’s always possible you could be hacked, as with anything online, overall you should be pretty safe using bill pay services.

Where to get bill pay service

Your bank or credit union

One of the best ways to use a bill pay service is through your bank or credit union. Almost every major bank and credit union offers this service, including Chase, Wells Fargo, Discover, Bank of America and Ally. Most bill pay services are free as long as you have an active checking account with the bank or credit union.

Bill pay apps or software

You can also use a bill pay app or software to pay your bills. You might also already be using software, such as Quicken, and therefore find it simple to go that route.

  • Quicken Bill Manager: If you’re a Quicken user, you can pay your bills using Quicken Bill Manager (formerly known as Quicken Bill Pay). If you’re not already a Quicken user, this might not be your best option, as pricing for Quicken that includes Bill Manager starts at $77.99 a year.
  • Mint: The budgeting app Mint is free to use and offers a bill pay service. If you’re using a credit card to pay your bills, there will be a fee.
  • Prism: Prism is also a free app with a bill pay option. However, Prism notes that some of your billers may charge a fee if you are using an outside bill pay app rather than your bank or credit union. When it comes to these fees, Prism shows the cheapest option first for each bill listed.

Merchants and service providers

Most merchants and service providers — such as phone companies, mortgage lenders and utility providers — also offer bill pay services themselves, so you don’t have to go through your bank or credit union or any other outside source. This could be a good option if you like the satisfaction of going through and paying bills one by one on their respective websites, rather than all in one place.

If you’re a Verizon customer, for example, you can pay your bill online or through the company’s app. You can also pay bills via its Fios TV cable box. If you use Frontier as your internet provider, you can also pay using the company’s site or app. You may also be able to do this with your electric company, credit card payments and more. However, this isn’t as convenient an option as paying all your bills through one bill pay service, which is one of the pros of simply doing everything through a single site.

How to set up online bill pay

Once you decide which bill pay service you want to use, it’s fairly easy to get it going. The process will vary slightly depending on the bill pay service you decide to use, and how you want to pay your bills, but generally speaking, the process is as follows:

  1. Gather your bills: Organize all the bills you want to pay using the bill pay service. Make sure you know the payee’s vital info, such as account numbers and addresses, should the bank need to send a paper check.
  2. Enter the info: Enter each biller’s information into the service. Double check each entry for accuracy.
  3. Select payment and timing: Once each biller’s information is verified, go through each and select the amount you want to pay and the date when it should be paid. Remember to leave a five-day cushion in case your bank or credit union needs to send a check. Also make sure you note how this will be paid. Sometimes with bill pay services, you must pay through a checking account, but in other cases, you may be able to use your credit card.
  4. Get reminders: Now that everything is set up, consider setting reminders based on the bills’ due dates, and find out when they were officially paid. Think of this as an extra layer of security to ensure the service is running smoothly.