Online Bill Payment Services Guide

Paying your bills on time is an important aspect of taking control of your financial life. Knowing when your bills are due and making a habit of paying them on time can reduce your stress, save you money, boost your credit score and enable you to get lower-interest credit in the future.

But how do you start making on-time bill paying a habit? It's easier than you may think.

Ways to Prevent Late Payments
We've come up with a list of 10 top tips to help you stop paying your bills late. Let's take a look:

1. Sign up for auto-pay. Most of your regularly recurring bills (ex. utility bills, mortgage, car loan, etc.) provide you with the option of having the amount you owe automatically deducted from a designated bank account. Make it easy - make it automatic.

2. Use financial software with automatic bill-paying reminders. Both Microsoft Money and Quicken have features that can prompt you days or weeks in advance of your bill due dates.

3. Consolidate bills. Say you get your internet access, phone service and cable TV from the same provider. Instead of paying three separate monthly bills, why not check to see if you can consolidate your billing to pay for all of the services you receive in one monthly statement? You'll be less likely to miss a due date that way.

4. Schedule bill-paying time. Carve out time on your calendar to pay bills on a regular basis in the same way that you schedule time for the gym or for work meetings. By setting aside a regular time to pay your bills, you'll create a habit that will make it much less likely for you to miss a due date.

5. Create a bill-paying location. Stuffing a bill into your purse or briefcase, or throwing it on the kitchen counter when you come in from work, is a good way to forget (and miss) the payment due date. Think about a convenient place where you can keep and pay your bills. Stock it with all of the items you need to pay your bills, including a computer and internet access (if you pay bills online and/or use financial software), your checkbook, stamps, pens, envelopes and a filing system to keep track of your paid statements. Then when it's time to pay your bills you'll have a comfortable, convenient place to do so.

6. Organize bills. Your bills should be arranged according to due date and note due dates on your calendar. Create a habit of noting the due date for a bill as soon as you open it (circling or highlighting it) and then putting the due date on your calendar. You may want a desk filing system where you can store bills according to due dates so you have an immediate visual reminder of which bills need to be paid next.

7. Give your payment time to arrive. Check your statement or contact your creditors to find out how many days in advance they recommend sending in payment. It's important to know how long it will take for your creditor to actually receive and process payment, especially if you are sending in payment around a holiday or weekend. You want to meet or beat the deadline, not get the check in a day or two late.

8. Learn your bill cycle. Review several months' worth of paid bill statements and list bills in the order that they are typically due. Most likely you'll notice that your bill due dates fall into two groups - ones due earlier in the month (e.g., the 5th) and ones due later in the month (ex. the 20th). As soon as you receive your paycheck, pay the bills that are due prior to your next paycheck. If you don't have enough money in your account to regularly pay all of the bills due before your next paycheck, contact your creditors to change a couple of your payment due dates.

9. Sign up to receive bills or bill reminders by email. Use email to your advantage. Check to see if your creditors provide online bill payment reminder features, or go “paperless” and have your bills sent to you electronically via email. When you receive the bill or reminder, use it as a prompt to log into your bank account and pay the bill, ensuring that you don't miss the due date.

10. Pay by phone. Many creditors allow account holders to pay their bills by phone, for free or a small fee. If you regularly pay bills late, consider paying by phone instead - more than likely the fee charged for phone payment service will be less than the potential late fee.

Bonus Tip

* Prepay bills. If you have a really hard time making your payments on time, you might want to consider prepaying your bills to avoid those punishing late fees. Many creditors will allow you to pay your bills in advance, effectively creating a "credit". If you have irregular income, or if you find that you have some surplus cash, consider prepaying one or more of your recurring bills and you won't have to worry about payment due dates for a few months. Just keep an eye on your monthly statements to know when you need to begin paying again.

Why It Matters
There are several important reasons why paying your bills on time matters. It helps you establish a good credit record and canboost your credit score. When you pay your bills on time, creditors report your good payment habits to the three main credit bureaus - Experian, TransUnion and Equifax. The more consistently you pay your bills on time, the higher your credit score is likely to be. Prospective creditors use your credit report and credit score to determine whether to approve your application, how much credit to extend (i.e., mortgage loan amount or line of credit) and how much interest to charge you. The better your record and the higher your score, the more likely your future applications for credit are to be approved, and at a lower interest rate. (For related reading, see Consumer Credit Report: What's On It and Five Keys To Unlocking A Better Credit Score.)

Not only will paying your bills on time help your credit score, but it also will save you money. In addition to getting lower interest rates on your credit accounts, when you pay your bills on time you will not be charged a late fee or penalty which can range between $25 and $50. You also won't have to worry about triggering an interest rate hike. Check the fine print, particularly on your credit card agreements, and you will likely find that the company reserves the right to hike your interest rate considerably (ex. from 2.9% to more than 20%!) for making even one late payment. And if the interest on your account is calculated daily, the sooner you make payment the less interest you'll have to pay. (For the grisly details, check out Understanding Credit Card Interest.)

Small Steps, Big Payoff
Paying your bills on time can reduce your financial stress. No more wondering if you've paid a bill, if you have enough money to cover the amount due (because you have other bills due as well), or how much you'll have to pay in late payment fees. You can rest easy knowing that your "financial house" is in order.

To get started, pick just one or two tips to start, then incorporate a few more as you make bill paying a habit and a priority. You'll feel more confident about your ability to manage your finances and save money at the same time.




PAY LATER

As online holiday shoppers rush toward the finish line, more of them may be choosing alternative ways to pay for goods than with credit cards.

Rising credit card rates, consumers facing maxed-out cards and security and convenience are some of the reasons for the shift.

“There are an increasing number of payment alternatives,” said Kurt Peters, editor of InternetRetailer.com, citing services such as eBillme, PaidByCash and Bill Me Later.

In addition, “Merchants don’t want to be locked into just MasterCard, Visa, American Express and Discover cards, and consumers have shown they like the alternatives,” Peters said.

Credit cards now account for 60 percent of all online transactions, debit cards another 26 percent and alternative payment methods 14 percent, said Bruce Cundiff, senior analyst for Javelin Strategy & Research.

By 2012, an estimated 30 percent of online transactions “will be handled by alternative sources of payment,” he said.

“The increase in alternative transactions as a percentage of all transaction volume will affect credit cards, which decrease … from 60 percent in 2007 to 44 percent in 2012,” Javelin said in a September report, “Online Payments Forecast.”

Debit card usage will remain steady, the company said.

Marwan Forzley, president and CEO of eBillme, said his company’s service “appeals to a type of consumer who does not have a credit card, or whose credit card is maxed out and is looking for other ways to pay.”

With eBillme, consumers pay for online purchases directly through their online bank accounts, much in the same way they pay electricity and phone bills online.

Merchants are charged a fee of between 1 and 1.5 percent for each transaction, compared to between 2 and 4 percent charged by credit card giants such as MasterCard and Visa.

With 84 million online banking users in the United States, Forzley said, online banking “is becoming a mainstream service,” and by using a service such as eBillme, “you’re using the money you have in your online account to pay a merchant.”

Among the companies that now use eBillme are Crutchfield, TigerDirect, and LuggagePoint.com.

Ebillme acts as an intermediary in the buying process. When a shopper chooses eBillme at checkout, their order is confirmed with a bill sent to their e-mail address. It’s up to the shopper to pay the bill through their online checking account.

“The merchant ships when you pay,” Forzley said.

PaidByCash, operated by Retail Expansion Network of Oakland, Calif., is geared to consumers who may not want to use credit cards online, or who may not have bank accounts.

Customers can load up to $350 on a PaidByCash card account for use online, purchasing the cards at stores such as Kmart, Rite-Aid, Safeway and Food Lion.

Payment is made through Western Union. The card itself is activated online, and can be used at sites where debit MasterCards are accepted.

Bill Me Later, another service, bills customers for their online purchases with payment terms similar to those of a credit card.

Customers have at least 25 days from the date of the first purchase before payment is due, according to the company, whose clients include Walmart.com, Overstock.com and Petco.

As with PaidByCash and eBillme, no credit card is needed with Bill Me Later, so concerns about security and fraud are lesser.

“The kind of consumers looking for these alternatives are looking for increased convenience or security in the transaction process,” said Cundiff of Javelin Strategy & Research.

Bill Me Later, he said, “has done a really good job integrating themselves with the marketing options of merchants, with such programs as ’90 days same as cash.’

“They’ve seen a lot of success with that in driving sales, and bringing customers to the Web sites.”

The Electronic Retailing Association advises consumers to make sure they read the fine print and know their rights when dealing with alternative online payment programs.

“As an industry, we’re agnostic about the various payment methods,” said Bill McClellan, the association’s vice president of government affairs.

“As retailers, what we look for is a track record of security and soundness.”








Cash or credit? For more Americans, who have already maxed out their credit cards or are just trying to manage their spending better in the tough economy, the answer is increasingly the old-fashioned one.

Retailers like Wal-Mart Stores Inc., Target Corp. and J.C. Penney Co. are noticing a marked shift away from credit cards in favor of cash and debit cards. A big factor is less credit available as major card issuers cut spending limits and raise fees even for customers who pay their bills on time.

The shift ends Americans' long love affair with credit cards and is one of the changes in consumer behavior that has emerged since the financial meltdown that could depress consumer spending this holiday season and affect shoppers' habits long afterward.

Particularly during holiday seasons past, shoppers could count on a pile of plastic to give them the extra financing needed to splurge on presents before they had to face the bills in January or later.

But even when the economy recovers and credit loosens up, analysts say Americans — shaped by what could be a deep and long-lasting recession — are likely to stick with buying only what they can afford just as their parents or grandparents did after the Great Depression of the 1930s.

"I think this is a new way of life," said Robert Smith, of Loves Park, Illinois, who along with his wife has been using cash and debit cards to finance their spending, including vacations, since they paid off their credit card debts in July. "I like to be able to know that we paid for something. I hate monthly payments when you use a credit card."

Smith, who has four children ages 7 to 13 and owns a motivational training company called Drive and Grow Rich, says his business is down 20 percent this year, and since he is saddled with a mortgage, he does not want to get back into debt.

While the credit crunch is teaching consumers to be more "financially prudent," it's creating a lot of pain for both consumers and stores, said Curtis Arnold, founder of CreditRatings.com.

One sign of how strapped consumers are for credit — and buying only what they have the cash for — is that for the first time in 17 years, Penney's has seen swings in spending around payday cycles over the past three months.

That's common for discounters like Wal-Mart, but a rarity for a mall-based department store — suggesting that Penney's middle-income customers are feeling the pinch as well. Penney's President and Chief Merchandising Officer Ken Hicks noted that the chain has not seen swings in spending around payday since about 1991, when the U.S. was entering a recession

At Wal-Mart, the volatility in spending around payday — a drop in spending in the days before, followed by spending bursts right afterward — has become even more pronounced since September. Chief Financial Officer Tom Schoewe told The Associated Press that shoppers are now unable to buy even necessities in the few days before payday.

Such swings became more dramatic last fall, but subsided when shoppers received their government rebate checks this past spring.

Eduardo Castro-Wright, president and chief executive of Wal-Mart's U.S. division, told investors last month that credit card payments as a percentage of total payments fell 7.4 percent so far in the current fiscal year, which ends in January. That's a big reversal from the robust double-digit growth rates in credit cards over the past three years, he said.

Target executives told investors late last month that it is seeing lower credit card usage among its shoppers for the first time since 2001-2003.

At Penney's, Hicks said that use of the company's store credit card was flat during the third quarter. The use of credit cards issued by other parties declined by a couple of percentage points as a percentage of overall payment, he noted, while cash was up by the same amount. Hicks said he has not seen a decline in credit card use in five or six years.

Scott Hoyt, senior director of consumer economics at Moody's Economy.com. said that Federal Reserve data has never shown an annual decline in credit card use, but he acknowledged that there is not any solid payment data. Visa Inc. said that debit card growth is coming at the expense of cash and checks versus credit cards. And MasterCard Worldwide said consumers are increasingly paying with plastic — debit or credit — at the expense of cash and check, but did not break out which portion was debit cards.

But many Americans are using cash or debit cards because they are being forced to. Laura Nishikawa, an analyst at Innovest Strategic Value Advisors Inc., a New York investment research firm, said that based on data from Visa, Master Card and American Express, the number of credit cards that consumers have fell 5 percent in the second quarter from the first quarter. That was mainly because consumers received fewer credit card offers, she said.

For years, consumers tapped into inflated home equity and used credit cards to finance their spending. Now those spigots are being shut off, and job losses are mounting.

"Consumers are really struggling to find sources of cash to make purchases," Hoyt said. "The rapid job losses are taking a big bite out of labor incomes. Obviously, it's making it much more difficult to borrow."

Online jewelry seller Blue Nile, which reported a 23 percent drop in third-quarter profits earlier this month, noted that deteriorating credit has hurt sales of jewelry priced from $5,000 to $25,000.

Doug Scovanner, Target's chief financial officer, told investors on Nov. 17 after disappointing third-quarter results that credit tightening across all U.S. card issuers "has already had a very important adverse effect on our sales, and I'm sure it will continue to do so."

Target is further tightening finance terms for its card holders as it confronts increasing defaults, and has promised investors that it will become even more stringent if credit conditions keep getting worse.

But Target and other stores are finding themselves in the awkward position of wanting to tighten their credit terms to protect profits while at the same time realizing that such moves could depress spending, Arnold said. So many stores are dangling generous interest-free finance offers and offering deep discounts of up to 20 percent if you apply for a credit card, he said.

Target is offering a 10 percent discount for new credit card holders, while Bluenile.com has teamed up with Bill Me Later to let customers delay payments for 90 days on purchases of $250 or more.

But don't expect Smith, the entrepreneur, to bite. He's sticking with his $2,000 holiday budget, much lower than the $6,000 he spent last year on gifts. He added that he and his wife are setting aside the holiday money in a separate account so they won't go over budget.