It's no secret that online bill-pay systems offer consumers a convenient way to pay bills without paper checks, envelopes or U.S. postage stamps. But these systems also give people greater control and flexibility in how they manage their personal finances, says Susan Tiffany, director of consumer periodicals at the Credit Union National Association in Madison, Wis.
Here's a look at some of the functions of online bill-pay and why you might want to use them.
Schedule One-Time Payments
The ability to delay payments until their due dates is one advantage of an online system, says Cary Whaley, vice president of payments and technology policy at Independent Community Bankers of America in Washington, D.C.
The practice of scheduling payments -- up to a year in advance at some banks -- allows consumers to keep their cash as long as possible without being concerned that a check might become lost or stuck in the mail.
"Corporations are notorious for waiting until the last day of the 30-day period," Whaley says. "This feature allows the consumer to apply the same logic, and that's managing your cash flow."
Set up Recurring Payments
A related function is the ability to set up recurring payments, an option that can be useful to schedule bills that are predictable and likely to be a high priority, Whaley says. Examples include mortgage and auto loan payments.
"You know what the amount's going to be, you know the amount's not going to change, and you want that paid every month, regardless," he says.
Imran Haider, head of bill-pay at Wells Fargo in San Francisco, suggests another example: making regular monthly payments to household workers such as a lawn-mowing service.
"A customer can set that payment to a specific amount, set it to 'recurring' and not have to worry about it," Haider says. "The payment will go out every month, and the customer will get an email confirmation, saying the payment was sent out successfully."
Regular payments of varying amounts, such as cellphone charges, also can be automated along with exceptions or rules based on the balance due, Haider says. This function is useful when a customer wants to automate payments but also wants "some kind of out" if the balance exceeds a certain threshold, he says. The rule stops the automatic payment and enables the customer to research the variance before paying.
Make Immediate Payments
Yet another benefit is the ability to make an immediate payment, which can be cleared in a matter of minutes, rather than days.
Haider says the same-day payment service at Wells Fargo is free for payments made to Wells Fargo accounts. Payments made to external accounts cost $7.95 to $14.95, depending on the type of payee.
Other banks also offer immediate payments, but not all have this capability. That means you should call your bank and confirm such a service is offered and if so, how much it costs before you try to use it, Whaley says.
Never assume a payment will happen immediately just because it's made online.
Money management tools that track spending are another benefit, according to a CUNA member survey. These functions categorize expenditures, such as groceries, clothing and entertainment, so consumers can "see where their money is going," the survey explains. The categories then can be used to create bar graphs and pie charts.
"These features are highly useful to time-pressed (consumers) trying to get a better grip on their finances," the survey states.
Being able to spot expenses that creep up until they cross some invisible boundary into budgetary pain -- CUNA's Tiffany calls these "outliers" -- can be helpful as well. "You just pay them routinely, and then all at once you notice, 'Holy cow, that category is getting big,'" she says.
Some banks offer the ability to integrate online expense tracking with personal finance software, Whaley says. That can produce a more comprehensive view and facilitate budgeting.
Other Online Bill-Pay Perks
Here's a sampling of other capabilities.
Monitor your balances. This ability is "especially useful," says Tiffany, for joint account holders who might at times neglect to inform each other of payments or withdrawals.
"You have a shared account with your partner, for example, and somebody wrote a check or used the debit card and forgot to tell someone else," she says. "Monitoring your balances will help you avoid overdrafts and the fees."
Monitor account activity. The ability to review transactions at any time provides peace of mind, Tiffany says. If you're paying attention, "you can tell almost in real time" if any unauthorized payments, fees or withdrawals have affected your account.
Person-to-person payments. Whaley says making payments to individuals rather than businesses is an emerging area of online banking. This service can be helpful, though the connectivity of various banks' services isn't yet ubiquitous, so it's important to contact your bank and confirm how it works before you use it.
Email or text message alerts. Some systems include "alerts" that consumers can set to trigger reminders via email or text message when bills are due or have been received or paid. These alerts function as a "call to action," Haider says.