We have many choices on how to pay our bills today. These include paying by check, electronic transfer, online bill pay and auto drafts. Many of us use a combination of methods to make sure that our bills get paid on time.
Let’s review the methods to pay bills and the pros and cons for each method.
1. Pay by Check
This method is simple and easy to understand. You can control the process and timing of payment. On the other hand, writing checks is time-consuming and the cost of postage is always increasing. Also, money does not come out of your bank account right away, sometimes leading you to believe you have more money in the account than you do.
2. Pay by Electronic Transfer
This method includes wire transfers, calling the payee with your checking account routing number and account number, and calling the payee with credit card information. This method is quick and dependable. You have control over the timing of the withdrawal and there is no risk of the payment getting lost or delayed in the mail. However, this method is only useful for paying one bill at a time. Also, fees may be charged and there might be online security concerns.
3. Pay by Online Bill Pay
You instruct payment by accessing your bank account online or the payee’s website. You are in control and set the payment amount and date. This method is best for monthly bills that vary in amount each month, such as a utility bill or a credit card payment. It is straightforward and you save money on postage. On the other hand, this method does require a computer and internet access. There are possible identity theft concerns because your personal account information is online. Also, fees may be charged.
4. Pay by Automatic Drafts
You give control to the business/payee and they remove funds from your bank account or charge your credit card automatically. This method is best for bills that are the same amount each month, such as your mortgage payment or health insurance premium. The pros and cons are the same as online bill pay above. In addition, you lose some aspects of payment control: the business can withdraw money from your bank account even if you don’t have enough money in the account. Also, this method is more difficult to terminate than online bill pay, which you control through your bank or the payee’s website. You often have to revoke authorization in writing. If you choose to pay your bills by this method, you still need to monitor transactions and balances to avoid overdraft fees.
People often ask, “What is the best way to pay my bills?” If you prefer the dependability of paying by check and don’t mind spending the time and paying for postage, pay your bills by check. If you are comfortable with online banking, there are many positives for paying your bills online. However you pay your bills, know the pros and cons of each method and pay your bills on time.
Beth Carroll is a CPA and a daily money manager. Her company, Cornerstone Money Management, LLC, helps seniors in their homes with billpay, financial organization and cash flow management. You may reach her at email@example.com or 401-323-4895.