Once you’ve built a reliable budget, you know certain recurring bills are always the same. Others may change from month to month, but they can’t safely be evaded. Paying these bills with checks amounts to a major hassle and, given the ever-increasing cost of postage, an annoying extra expense. Check-writing also subjects you to some risk: your payment could get lost or stolen in the mail, leaving your bill unpaid and you in hot water. And having a piece of paper with your account number, name, phone number, and signature on it bounce from hand to hand sharply increases your exposure to identity theft.
It’s much safer, much easier, and far more reliable to pay bills through your bank or credit union’s Bill-Pay system. At my credit union, this service is free.
Bill-Pay allows me either to set up regularly recurring automatic payments or to send payments manually each month. I use automatic payment for bills that are the same each month, such as insurance premiums and the Cox bill. This is extremely convenient, because I don’t have to do a thing to get the bills paid. For figures that vary from month to month, such as the utility bills, when the statements arrive I just click on a button, fill in the current balance, set the date for payment to be delivered, and click “pay.”
Once I’ve created a payee, it remains on the credit union’s payee list until I delete it, so I don’t have to re-enter data each month.
To “pay myself first” by depositing monthly savings promptly, I use the credit union’s scheduled funds transfer function. This is extremely easy to set up and relieves me of having to remember to do it each month. At any time, these scheduled transactions can be changed or canceled.
It’s also possible to do a one-time scheduled electronic transfer. For example, to pay the $2100 property tax bill this year, I needed to move money out of the money market savings account where I accrue savings for annual bills into my checking account and then pay the County Treasurer from checking. Well, since that sinking fund is in the money market to earn interest, I didn’t want to move the money until it was actually time to pay the bill, but neither did I wish to try to remember to do this manually on the appointed date. So I arranged a one-time transfer from money market to checking to take place on the first of the month, and then scheduled the property tax bill to be paid on the second. In that way, I got a full month’s interest on the $2100, the bill was paid on time, and I didn’t have to think about it again.
Recently the credit union subscribed to a new service called PoP, which allows you to pay individuals. This competes directly with PayPal, which can give you a sharp ding on certain transactions—PoP appears to be free. And you don’t have to wait three to ten days for money to transfer from your account to PayPal to before you can transfer money to an individual. Perfect for kids away at college…and for my business’s subcontractors!
Most employers prefer to direct-deposit paychecks. This requires you to go to the employer’s HR site and download or print out your pay statement, but that minor inconvenience is as nothing compared to having to traipse to the bank with a check. The money hits your account on payday, not whenever you get around to going to the bank, and not whenever the bank gets around to posting the check. And it never gets lost!
State agencies that disburse Unemployment Insurance checks resist direct-depositing, apparently because they’re getting some vigorish from banks to load your UI onto debit cards, which are subject to the usual bank gouges plus some unpredictable ones. But you can insist that they direct-deposit your Unemployment check. And you definitely should: it will save you a lot of hassle and bank charges.
Social Security cheerfully direct-deposits old-age benefits. I’m not eligible for veteran’s benefits or a pension, but no doubt they can be direct-deposited, too. I do have Fidelity direct-deposit the tiny drawdown I have to take to remain eligible for the state’s retiree sick leave payout; this amounts to 77 cents a month. The annual sick leave payout (RASL) of about $4,500 net is also direct-deposited.
Then there are the folks who just insist on paying with checks.
Banks and credit unions now have a feature that allows you to stay friends with these people: you can scan a check to a JPEG and then electronically deposit that! Depending on the quality and speed of your scanner, it’s a little bit of a hassle…but it sure is better than trudging to the bank.
All these tools, now available through most banks and credit unions, work to reduce financial stress. They save you the time and hassle of having to drive through traffic to make routine transactions; they guarantee that your bills get paid on time (assuming you have enough cash in your account to cover them!); and they make saving easy and automatic.
PoP decidedly is not free. When you send a payment, the charge is $5 for standard delivery and $8 for same-day delivery.
Depending on the amount, this may be more or less than PayPal. Paypal is cheaper than PoP for amounts below $162. When you get above $162, you start to save money as long as you’re using standard delivery. At $265, you could get the next day delivery for the same as PayPal’s “some day my love will come” service, and anything above $265, PoP’s express delivery would be cheaper than Paypal.
Unless you ask the bank in person, you don’t find out how much these fees are until after you’ve signed on. The terms of service contain some onerous conditions hidden deep in the fine print.
If you have a payment that needs to be delivered across the country today, it may be worth the cost (and the risk). But otherwise…for small amounts, eventually PayPal will do its thing.
The New York Times has been holding forth about how online banking entangles customers with pricey fees and discourages them from changing banks.
If your bank charges for the bill-pay service, that’s yet another good reason to move to a credit union! Credit unions do not abuse their customers.
But if you’re setting up payments on your end—either paying manually or arranging for BillPay to send a specified figure to a creditor—turning off BillPay involves nothing more than a click of a mouse. You can then pay with checks for a month or two until you get all your funds settled at the new institution, or put enough cash in the new account to cover your bills and set up the manual, your-end-rules type of Bill Pay there.
Automatic payment’s only impediment to closing a bank account and moving money to a better institution would happen when you have allowed a creditor to engross money from your account from its end. This is how automatic bill-pay used to work: You gave your routing information to the utility company, a mortgage lender, or an insurer, and they sucked your payment out of your account on a given day.
I still have my utility bills and my long-term care insurance paid in this way. The credit union’s manager told me it’s a bad idea, and he said that insurance companies in particular were hard to disengage from this method. However, it seems likely that if you called and wrote their billing department and announced the account was being closed and you would pay with a new method, it would register.