Pros & Cons of Online Bill Pay

The ability to pay bills online makes it convenient to manage your finances. Once you enter your creditor's information into the online banking system, payment can be set up at a moment’s notice and delivered on the date you choose. It also makes it easy to organize your bills and search for specific account activity, though you’ll have to check regularly for signs of fraud and stay organized to pay bills on time.

Paying your bills online requires only a bank account and some organizational skills. There’s no need for an envelope or stamps, and no worries about running out of checks or getting a money order. Recurring payments can be scheduled in advance, so there’s no need to remember to send in a payment every month. You can log on to your online banking account and see at a glance what bills have been paid and which ones have been set up to go out later. Anyone who has a problem organizing his paper bills may find online bill pay easier to manage than a pile of paper bills.

Bills that are transmitted electronically generally get received and credited faster than when you mail a check. If you tend to save your bills until the last minute and mail paper checks, this can give you a little extra wiggle room. In addition, online bill pay provides a record of your payments. If there’s any confusion whether a payment was sent, it’s more than your word against the merchant’s. It’s easy to review past bills by searching for a specific payee, so you can monitor changes over time. This can be helpful for tracking items like grocery bills to document your spending habits.

Depending on how you manage your finances, an online bill pay system may not provide the flexibility you require. For example, most banks won’t allow you to send a payment via online bill pay unless you have money in the account to cover it, since it debits your account immediately. If your account balance is running low and you have a bill due in three days, the day you get your paycheck, you can send a check and by the time it arrives, you will have money in your account to cover it. If you instead rely on online banking, your financial institution may not process the payment until you get paid and the account is replenished, meaning you risk late fees. To avoid that, you would need to pick the payment date so it corresponds with the due date.

As with any other bill-paying strategy, the system is only as good as its organizer. Electronic payments can take varying times to process, based on both your bank and the creditor’s systems. Waiting until the last minute to pay your bill has the same risk as a mailed check if the payment won't get posted until the next business day, for example. Typos can prove costly. A misreading of the decimal place can turn a $20.31 bill into a $2,031 payment, or a $157 electric bill into an inadequate $1.57 payment, errors that are harder to make when you’re writing a check.

Paying bills online can put you at risk of hackers intercepting your personal information and gaining access to your bank account. The risk can occur both from your own bank’s system being compromised or that of one of your payees. Monitor your account regularly to check for unauthorized charges. Some banks and credit unions may ask you for extra verification when setting up a new payee or when the amount of a bill payment changes radically from previous patterns.