Online Bill Pay—What it Is, How to Use It, and Why You Should

Online bill pay, a service now offered by most banks and credit unions, makes it easier to organize your bills and pay them when they’re due. If you juggle rent or mortgage, cable, electricity, credit card payments and more, online bill pay can save time and help you avoid late fees.

I once flew in a chartered jet, not exactly like a rockstar, but I did feel quite pampered. The flight was awesome, but I have to admit to freaking out when the pilot unbuckled, stood up, left his pilot seat and came back to chat with his three passengers over snacks and sodas.

While he sat with us for more than an hour, it took only a few minutes for me to relax, enjoy the company and the ride.

Relying on autopilot in both flying and finances is quite an amazing thing.

By putting your payments on autopilot, you eliminate those monthly decisions: Should I pay bills tonight or wait until Tuesday? Should I put money into savings this month or buy those cute shoes?

You can set up auto payments two ways:

Online bill pay

Creditors, especially banks and credit-card issuers, are unbelievably sensitive to whether you pay your bills on time. So is your credit score. One slip-up could cost you dearly if that means you lose your low- or no-interest rate, or a late payment results in a big late fee.

Using your bank’s online bill pay option, which is a free service at most banks but also at credit unions, brokerages, and mutual fund accounts, is an excellent way to keep a clean record with creditors and other service providers. Automatic bill payment is a money transfer from your account to a creditor on a predetermined date or schedule, to pay a recurring bill.

Automatic payments can be made from a checking account or credit card account. They are usually set up with the company receiving the payment, though it’s also possible to schedule automatic payments through a checking account’s online bill pay service.

Banks don’t all operate exactly the same way, so go online to check out your bank’s auto bill pay service.

Automatic authorized payments

Most lenders and other service providers will let you set up online automatic payments authorizing them to reach into your bank account to take an amount you specify—the minimum payment, a set dollar amount or the full balance—every month from your checking account right before the payment is due.

Go to your credit card issuer’s and other lenders’ websites to learn more.

Most utility companies now offer this kind of service, too. And while we’re talking about it, if you set up your student loans to be paid automatically, expect to get a reduction in your interest rate as a nice thank-you. Check it out.


Automatic payments have become hugely popular because they offer so many advantages.


By setting your bills to be paid automatically, you’re not as pressured to keep track of due dates. Once an automatic payment plan is created (you can cancel or amend it anytime since you’re the boss when it comes to auto-pay), your bank or credit card issuer will take care of the rest.

On-time payments

Late payments are reported to the credit bureaus and that can mean a serious blow to your credit score, which may result in higher insurance premiums now and higher interest rates on your next mortgage. If you’re thinking “domino effect,” you are exactly right. Bottom line: Do not pay late!

An excellent way to make sure you always pay on time is to automate, sometimes referred to as  auto bill-pay or online bill pay, even when you’re on vacation, sick, or for some other reason suffer from brain freeze.


Some creditors offer reduced interest rates and or fees when you agree to automatic payments. Even a small reduction in the amount of interest you pay every month will add up over time. Check it out. Don’t know if your student loan, mortgage, or other lender offers that kind of discount? Call customer service. Ask questions and keep asking until you get answers you fully understand.


The biggest reason most people use auto-pay to put all of their monthly payments on their travel rewards credit cards is to get reward points for travel. All those bills add up to hundreds of points each month, and can easily result in lots of free travel every year.

CAUTION: Make sure you have authorized your reward credit-card issuer to reach into your account to transfer the full amount you owe so that the balance returns to $0.00 before the start of the next billing period.


By eliminating paper bills and check writing, you reduce a lot of paper. Plus, you don’t have to buy and keep on hand a constant supply of postage stamps.

Credit score

When your bills are set up to be automatically paid, missing a payment or becoming delinquent becomes a rare, if ever, occurrence—two things that will kill severely harm your credit score. When your bills are always paid on time, it keeps your credit score healthy, perhaps even boosting it into a higher more enviable bracket.

Reduced chances of ID theft

If your bills are not mailed to your home and you are not mailing in paper payments with a credit card or checking account numbers, you reduce your risk of identity theft.

Of course, there are risks when paying online, but the security surrounding these payments is typically far greater than the security offered by an unlocked mailbox. Mailing payments may not be as safe as you imagine.

Saves money

Since you’ll no longer have to pay for checks, stamps, envelopes, or gas for trips to the post office, having your bills paid automatically lets you keep more of your hard-earned money.


Automated payment comes with potential disadvantages, which you should consider and understand fully.


Some companies charge a fee, which is maddening since automatic payments save them money in processing and chasing after delinquent payers. Don’t fall for paying a fee. If that creditor or service provider wants to charge you, pay instead with an old-fashioned check or money order.

Losing track

With automatic payment plans, it can be easy to forget what you have scheduled to be paid and when. If you run your bank or credit card accounts close to the edge, you’re setting yourself up for overdrafts, which come with huge fees. Another problem is that banks and others make mistakes from time to time. They may jump ahead of your schedule, so keep a calendar and check your accounts often.


Automatic payment plans can be set up in a matter of minutes. But stopping them can be more difficult. Sometimes you have to notify your bank and your merchant, and you may need to do that in writing. Should you stop or change your auto-pay schedule, watch very carefully to make sure your instructions are followed exactly as instructed.

Final word

For my husband and me, the convenience of having as many of our bills automatically paid definitely outweighs the risks. It saves us time and money, and in some cases, we are rewarded with cashback, miles, and or points. But it does take a certain amount of discipline to avoid trouble. We do not simply “set it and forget it.” Truth be told, we watch accounts like a hawk, checking balances and activity daily—often several times a day. We know that if mistakes occur, we could be held accountable. Reporting discrepancies immediately, if not sooner, is the way to keep trouble at bay. Good money habits start with being aware of what you owe and when you owe it.


Here is a compilation of answers to the most frequently asked questions on auto-bill pay that show up in my mailbox.

How does online bill pay work?

It is pretty simple: You enter a person or company you want to pay and the service sends your funds electronically or prints out a paper check and mails it to the payee. You can receive, view, and pay an unlimited number of bills for up to a year in advance of the due date on one web site.

What is an online bill pay?

Online bill payment is a secure electronic service that allows customers to pay bills without having to write checks and mail them. Online bill payment usually is tied to a checking account from which funds are withdrawn electronically for payment of one-time or recurring bills.

Is it safe to pay bills online?

Online bill paying is safe when you choose the right bill payment service. Typically, an online bill pay service that is backed by a bank or a company that provides online banking services will be safe and reliable. Online bill paying is much safer, for example, than handing a credit card to a waiter at a restaurant.

Will my online bill pay service send a paper check?

Payments can be sent by your bank electronically or via paper check, so you can pay even if the biller isn't set up online. Many banks offer basic bill pay service for free with their checking accounts, though they may charge for extra features, such as being able to access transactions from your financial software.

Is there a fee for online bill pay?

Online bill pay set up through a customer's bank is often free, although the checking account needed to provide funds for payments may require a minimum balance or assess fees. Typical costs: Online bill pay services range from free to $9.95 per month.

How to set up online bill pay?

It takes time and effort to do this, but it is so worth the effort!

1. Gather your bills including all the account numbers and addresses where you send payments.

2. Enter this information for each biller into your bank's online bill pay platform.

3. Choose when to send the payment.

4. Select either recurring or one-time payment.

5. Set reminders to track when each bill is due.


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  1. Bonnie Feldbush says:

    I utilize our bank’s on-line billing. All of our creditors are set up (utilities, etc.) including the credit cards we are paying off one by one (thank you, Mary and Dave Ramsey – snowball method!!). The only debts we don’t pay via on-line banking/auto pay are our car and cable bill payments; we do that directly on their websites. All of the other bills are set up to come out weekly, in one-quarter monthly implements (e.g., if a monthly payment is $35, we pay $10 weekly, which also cuts down the interest we are paying on a credit card bill). We’ve been doing this for several years, and it works wonderfully for us. We still use a physical check register, so we go through those more frequently, but it’s completely worth it to us to manually deduct payments that are coming out every week. We take cash out weekly for gas, groceries and misc things (cash envelope system). For the most part the only checks we write are our weekly offerings/tithing to God/our church.

  2. Susan says:

    I have used on line bill paying for years. I only do auto pay for my phone bills because I receive a deduction. I like to control when I pay. It is so easy and no stamps. I use it for even dental and doctor payments. Love it!

  3. Cath says:

    I read through this article pretty quickly since I’m already using on line bill pay, have been for many years. Perhaps you need to clarify that you can choose to manually pay your bills once a month (or however frequently they arrive) or have it done automatically. I have never done it automatically. I enter each new amount each month myself. Maybe those who are reluctant to try this need to understand that it doesn’t need to be done automatically. You also might mention that you can pay your taxes on line, including your estimated taxes—federal, state, and local. It’s free. The only exception I’ve found to this is our township tax office. You can pay by credit card, but they assess a fee. Paying by check is free. It’s about the only time I write out a check for anything. Good for the environment, your own pocketbook, and the taxpayers. Bad news for the USPS and the people whose jobs are lost to increased efficiencies.

    • Mary Hunt says:

      Yes, each payment you set up can be designated as “recurring” or “one-time.” I’m pretty sure that is what you are referring to!

  4. Suzanne Patterson says:

    While I do pay as many bills as I can electronically, I won’t use the autopay feature. It’s great while you still need or want to pay a particular bill, but you pay a price in time and aggravation when you want to stop that payment. In my experience, as long as the payee has the ability to take money from your bank account they will use it. And getting them to stop can be a long, drawn-out process.

  5. Sherry Spoon says:

    I love online bill pay!! It saves me postage and time. I also love that I can set the date for a bill to be paid, then forget about it. I’ve never had any issues with it.

  6. Brenda says:

    I jumped at online bill paying a few years ago. It has saved so much with regard to stamps, etc, like Mary mentions. I only have our phones and cable as auto pay, so that we never lose our phone service and… God forbid… our tv service. I once had forgotten our camper payment until 2 days prior to due date… online to the rescue. And I set a reminder for myself so I wouldn’t forget it again. The only bill I pay by check now is a hospital that is outstanding right now and they don’t charge interest on balance.

  7. Jerrie Z says:

    I love it. It may be automatic, but you still receive your bill and they let you know when it was paid and all that you paid for so if you have any questions, you can call them. It sure is a relief. Now the only bill I do not have automatic is my cable , I do not trust them at all. It sure is stress free. You can also opt out of it if you don’t like it.

  8. oneFrugalLady says:

    I have been using bill pay for over 15 years. Seven years ago, I took the responsibility helping my parents pay their bills and balance their checking account. I got them a debit card and bill pay. My father died in 2016 and I became mom’s caretaker. Bill pay saves me a lot of time and the bills are paid on time.

  9. Miriam Kearney says:

    I was probably the first early adoptee of online banking and as soon as online bill pay was available I jumped there too. Never looked back. Wouldn’t have it any other way.
    Here in Canada where we only have a few national banks, there is no charge at all for online payment and we have all the options that Mary talked about. My credit score has never been happier. I am notorious for losing track of date and time so any bill that isn’t automated is paid as soon as it is received – I can even set it up to be paid on time in advance – I do that with credit card bills so they are paid on time but not too early. Our banks, (don’t know about American banks) guarantee our security and should there be a problem fix it easily.

  10. Mary Jammerman says:

    I have used online bill pay for many years now and have found it to be most convenient saving me time and money. As time goes on I use auto pay more and more frequently 4 payment such as phone, electricity, garbage, etc., Anything that comes on a regular basis in this usually the same amount each month.

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