Wednesday, February 4, 2009

Online Bill Pay -- Where to Start

One of the truly great things about having a credit card is the convenience that it affords. With a credit card, you can almost completely avoid carrying cash or checks. And, now with the advent of online bill pay offered by most banks, a credit card can even be used to pay routine monthly bills.

Some of the larger banks that offer online bill pay include Chase, Citibank , Bank of America and HSBC. Generally, a checking account must be maintained with the financial institution to set up online bill pay.

But, many allow you to add a credit card as an additional funding source that can be used to pay when you don't have the immediate funds to cover your bills (or if you wish to take advantage of the 25-day free loan offered by the credit card companies). Others may wish to use a credit card for recurring payments to earn rewards, cash back, airline miles or other freebies offered through their particular card.

Regardless of your motivation to explore online bill pay, the place to start is with your bank. The first step will be to set up an online user ID and password with the bank's website. Then it's just a matter of choosing the online bill pay option and entering your checking or credit card account information. Most banks have a standardized list of merchants that accept electronic bill payments, along with options for sending one-off or recurring payments to specific billers.

The Visa and MasterCard credit card associations have been very aggressive in signing up new merchants to accept online credit card payments in recent years. This includes types of companies that traditionally only accepted payment in the form of a check in the past. Monthly billers like mortgage companies, large apartment complex owners, power and electric utilities and cable television companies are joining the ranks of online bill pay acceptance in droves.

And, with the addition of these types of merchants into the online bill pay world, tremendous rewards can be earned by credit card holders. This is because now large, recurring monthly payments can be leveraged to rack up free cash back or airline mileage rewards. People are realizing that it would be like leaving money on the table to not take advantage of free rewards.

Another advantage of online bill payment is that it guarantees on-time payments of life's most critical and time-sensitive bills. Whether it's a mortgage or rent payment, or perhaps a credit card bill, being late is not something you have to worry about each month with online bill pay.

Most banks have made their bill payment services free of monthly service fees, as well. So, there are no more excuses for not taking advantage of one of the greatest leaps in financial convenience to come along in the past 20 years. Bear in mind, however, that regardless of whether you use online bill pay for the convenience factor, or just to rack up rewards, it's critical to pay off the credit card used each month. Non-discretionary spending like rent, mortgage, utilities, etc, can get out of control in a hurry if allowed to pile up month after month on a credit card. As with everything involving credit, discipline is paramount.

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