Pay Your Bills Online

Paying bills online through your bank generally works best

Of all the options discussed in this report, paying bills online through your bank will merit first consideration for most people. Many banks offer bill paying along with other valuable electronic services such as online transaction records and account transfers. And since you already have an account, these services are often free as banks compete for more web customers.

As added enticements, Citibank, Wells Fargo & Co., JPMorgan Chase & Co., Bank of America and many other banks have added sophisticated personal finance tools to their usual mix that experts such as The Wall Street Journal say compete with Quicken and Microsoft's software. Customers can track where their money is going across multiple accounts, pay their bills more quickly, get alerts with a mobile device and monitor their accounts for suspicious activity.

Most banks use CheckFree as their online banking provider. The service allows you to pay any paper bill as well as "e-bills" from participating companies. The difference between CheckFree and a service like Paytrust (discussed below) is that with CheckFree, paper bills will still come to your home. That means that for billers who don't support online bill presentment, you'll still be getting a paper bill delivered to you. If you use your bank's online bill payment (supported by CheckFree), bills are paid electronically whenever possible. If the biller doesn't accept electronic payment, the bank will mail out a paper check to be drawn on your account.

Given that these online services are now free, consumers are signing up in droves. According to a survey by Harris Interactive and The Market Workshop, about 74% of households paid some bills online in 2007. As for customer satisfaction scores, Citibank and Bank of America get the highest marks for their online banking websites, according to Keynote Competitive Research.

If your bank doesn't offer online bill pay, you might consider a paid service like Paytrust.com. With Paytrust, bills are no longer physically sent to your home -- rather, they go to Paytrust, who then presents them to you online. That means Paytrust is a good option for those who spend a lot of time away from home, since you don't need to worry about missing a paper bill. Paytrust.com allows you to pay any bill, regardless of whether the biller accepts electronic payment. If the biller doesn't, Paytrust will issue a paper check. You can also view any bill online regardless of whether or not the biller sends bills electronically, as these bills will be scanned in for presentment.

With Paytrust.com, you can make up to 30 transactions per month with its Plan 2 (*est. $13 per month). But keep in mind that receiving a bill and paying a bill are considered two separate transactions as discussed above, so you're actually only paying a maximum of 15 bills. A bonus of online payment is that you no longer have to deal with stacks of paperwork, as your billing address will be changed to a Paytrust.com address. You won't miss out on misdirected mailings, though, since Paytrust.com will send any misdirected correspondence, such as a new credit card, to your home address. Having all your bills sent somewhere else is a real benefit to those who travel frequently, since you won't need to enlist someone to pick up your important mail. Rather, all your bills can be accessed and paid efficiently through Paytrust.

If you don't like the idea of forwarding all your bills to another location, you may want to consider MyCheckFree.com, the sister site to CheckFree.com. While you won't be able to sign up directly on the CheckFree.com website without being filtered through a financial institution, users can directly access MyCheckFree.com and register on its site.

MyCheckFree.com is completely free. The tradeoff is that you may only pay billers affiliated with the website. In addition to the major billers, other associated billers include telecom, utility, retail and insurance companies. While some bill-pay services, such as Paytrust.com, only allow payment through your checking account, MyCheckFree.com allows credit card payments as long as your biller takes them. However, fees may apply for credit card or same-day payments. CheckFree.com also protects against fraud and offers a payment guarantee should a payment arrive late after being scheduled for on-time delivery (Paytrust also offers this). The only caveat is that the service doesn't provide tracking of your expenses like Paytrust.

Although they are not as robust as Paytrust.com and MyCheckFree.com, you may already have some online bill-paying features available to you. For example, AOL members are offered a free bill-pay service along with AOL's other features. AOL Bill Manager Plus alerts you by e-mail when you've received an e-bill, but when you are ready to pay, you are forwarded to the biller's website to pay directly. This cuts out the middleman and allows for a more immediate payment than going through a third party. That means that subscribers must run around to various websites to finally pay bills. Still, AOL does provide a unique fraud protection service that prevents against cell phone and credit card overuse, as well as helpful tools for tracking expenses.