Now that managing one’s financial life online is mainstream — and heavily marketed by most financial institutions — many of my clients feel pressured to adopt electronic bill paying methods. Going against your natural financial management style is never a good idea. When I help my clients with their daily money management tasks, I adapt to their style. Otherwise it’s a recipe for disaster. The key is to choose a method that’s workable with your lifestyle. You have many options, including:
Bill Paying The Old Fashioned Way: By Mail
Sometimes called snail mail, this tried and true method is still a viable method. If you’re a visual person who likes to review account information via paper rather than on a screen, then using old fashioned pen and checkbook is best for you.
Pro: The upside is that you’ll be spending more time with your bills, handwriting out checks for payments and probably reviewing your statements. My clients who prefer this method tend to be in tune with their spending and catch errors or accounting changes.
Con: You need to have the discipline to send payments well in advance. Grace periods are shrinking, and mail delivery can vary especially during the holiday season. This is the least secure method also, in that identity thieves can harvest not only your checking account number, but also your signature right off the checks you mail. If you choose this method, be sure to take your bill payments to the post office and mail them there.
Online via Your Bank
Most banks and credit unions offer some type of online banking, including a free bill paying service. Utilities, credit card companies and other vendors encourage you to go green by signing up for estatements. When set up through your bank, you’ll be sent notices when bills are due. Some even allow special text messages to alert you.
When you first set up your bill pay account, be sure to set aside at least an hour and have all your monthly bills with account information handy. Some financial institutions offer this service in your local branch. The thought is that once you get started, you are less likely to take your account elsewhere.
Pro: Once everything is organized in your account, you’ll find that routine bill payment is fast and easy.
Con: You need to make sure you keep track of your payments and how much is in your bank account so you aren’t surprised when money is pulled out electronically. Some banks will alert you with a text or e-mail when you balance falls below a certain level that you set. This can be very useful in a case like this.
There are two ways you can make payments directly with a vendor. The first is through each vendor’s website. You’ll log in to each account and set up a payment. The second is by setting up automatic payments through your debit or credit card. Commonly referred to as Electronic Funds Transfer (EFT), the vendor (e.g., utility or credit card company) will withdraw the money each month to pay your bill.
Pro: You are in control of payments and you’ll view statements directly on vendor sites.
Con: Like with any automatic payments or deductions, you’ll need to keep close track of your bank account balance. If you set it and forget it, you could easily overdraw your bank account unless you keep a substantial cushion.
Daily Money Manager or Similar Bill Pay Service
If your budget allows, you can hire a professional to handle bill paying for you. Daily Money Managers specifically help their clients pay bills, keep track of important financial documentation (e.g., tax deductions and related paperwork). Some work remotely, meaning they don’t work with you face-to-face, while others are willing to work by your side to get systems setup and ensure your bills are paid on time, every time.
Pro: A Daily Money Manager will pay your bills and reconcile your accounts on a regular schedule alleviating the worry that bills will be late or accounts overdrawn.
Con: The service does cost money, but that is often offset by the savings you might realize from no longer paying late fees or overdraft charges.
Next time we’ll talk about budgets, or as I like to call them – spending plans.