Online Bill Paying

Best ways to pay your bills online

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.

Software bill pay

All the bill-paying services, naturally enough, handle bill payment. What some don't supply is a complete financial management system. Software programs fill this niche. CNet.com reviews Microsoft Money 2008 Deluxe (*est. $30) and Quicken 2008 Deluxe (*est. $60), both of which offer online bill paying. See our report on accounting software for a more in-depth discussion about these two programs.

With respect to online bill payment, Money 2008 lets users pay bills online through MSN Bill Pay for free for two years. MSN Bill Pay works like online bill payment from your bank. You can pay e-bills or pretty much anyone else once you set up the account. You can then track your bills and payments through the Money software. And you can set desktop alerts, get check images and create snapshots of bills or cash flow.

Quicken offers something similar, but you'll have to shell out money for its online bill-pay feature, called Quicken Bill Pay (*est. $10 per month for up to ten bills). Your bills and payments can be managed with the software, and a redesigned home page lets you see a running transaction history and balance information. You can also attach documents, display cash flow and monitor upcoming bills. Quicken also works with over 5,300 online financial institutions, including PayPal. You can now also make payments online via Quicken using your iPhone.

Both software titles are overkill if you are only looking to pay bills online, but if you already own this software or want to manage your finances as a whole, they are worth a look. You might want to check to be sure your bank supports downloading information into Quicken and Money first -- most major banks do.

Online wallets

A couple of services let you pay merchants and others though one account, but they aren't full-fledged online bill-payment options because the vendor must first accept payment through them. You've probably heard of or used PayPal. This service isn't so much a full-featured online bill-payment solution as a way to quickly pay for online purchases or even make payments to individuals. This type of service is known as an online wallet. You only need to enter your credit card or bank account information once -- then you supply your PayPal account name and password to make payments to participating online stores, individuals or vendors accepting PayPal on eBay (which actually owns PayPal).

PayPal lets you make payments in 190 countries, and a PayPal account also lets you receive funds as well as pay bills. CNet.com's Elsa Wenzel says PayPal's interface is the "model of clarity." PayPal isn't without critics, however. It never costs you to make payments through PayPal, but there are limitations on receiving payments through PayPal, especially if you want to be able to accept credit and debit cards (if you have an eBay store, for example). You'll pay a fee of between 1.9 and 4.9 percent plus 30 cents for payments made to you with a credit card. Receiving payments from another person's PayPal account is free for those with basic accounts.

Google also has an online wallet service: Google Checkout. Though it's gaining traction, it still isn't as well established as PayPal. Early reviews weren't great, and users had trouble with transaction delays and spotty customer service. But we haven't read any recent complaints about Google Checkout -- unlike PayPal. However, Google Checkout can only be used to pay vendors -- it can't be used to pay individuals (or to receive payments).

In a head-to-head comparison of PayPal and Google Checkout, CNet.com editors prefer PayPal's deeper services. For now, Google Checkout doesn't allow peer-to-peer payments, and it's only used by hundreds of merchants compared to PayPal's thousands. CNet does appreciate Checkout's detailed privacy policy and fraud protection, however. And, you can easily view your purchase history and track orders.

Both PayPal and Google Checkout have fraud-prevention policies in place, and you can file a claim in case of a payment dispute or fraudulent charge. However, we have read complaints about people getting the runaround trying to get a credit from PayPal for fraudulent charges. And ConsumerAffairs.com notes that PayPal isn't "subject to most banking regulations." Users have complained that customer service is difficult to reach. In an article at Consumer Reports, editors suggest using a credit card as your preferred payment method for these services -- that's because credit card companies also have fraud policies in place. You can specify a bank account for payments, but banks don't have the same strict fraud liability limitations in place.

Amazon.com is also launching its own payment service called Amazon Flexible Payment System (Amazon FPS). Though still in beta form, the service will let Amazon customers purchase items or services using their billing information. However, small fees will be collected for each transaction, unlike Google Checkout's free service.

Credit card bill pay

Many credit card companies also now offer automatic bill pay. Visa, American Express and MasterCard all offer these bill-paying services at no extra fee, and the charges are added onto your monthly bill. You submit a list of the bills you'd like paid from a limited list, and then the credit card company pays them, charging the amount to your card. The main hitch is that you have to visit each company's website to sign up for this service, and it can take up to 60 days to get it going. If the company you want to pay -- mainly the big utilities, insurance companies and Internet service providers handled at all three credit card companies -- isn't on the list, you're out of luck. However, you can view payments online, sign up for alerts and get payment confirmations, which helps track expenses.

Bankrate.com says that paying bills with credit cards makes sense when you're automating payments because you're better protected if there's an error or dispute. Another plus is that you can sometimes chalk up big rewards or free airline miles as payments build up. The downside is that if you don't pay your credit card bill by the end of each month, interest accrues. "That automatic ‘convenience' suddenly got more expensive," adds Bankrate writer Dana Dratch.

Important Features: Online bill paying

Here's what experts say to look for in an online billing service:

• Some services will only work with payees with whom they can interface electronically. If all your bills are covered by their list, that's fine. If not, you're still going to have to pay some bills manually.

• Some services, such as Paytrust.com, require you to change your billing address to that of the service provider. The service you choose should help you notify billers of the change. This type of online bill-payment service is a good option for those who are frequently out of town for long periods, when they might miss an important bill in the mail.

• If you already use a software package like Quicken or Microsoft Money to track your finances, the service you choose should be compatible with that software to avoid extra bookkeeping. For example, Paytrust.com is not compatible with Quicken.

• Make sure you have a secure access. Public networks, such as hotel business centers or wireless centers, don't give you complete data privacy.

• Be careful which bills you pay automatically. Experts suggest only making automatic-payment arrangements for bills that are the same amount every month. That way, you don't have to contend with payment errors.

• The service should guarantee accurate and on-time payments. If not, the late fee should be covered by the service. All services have this feature. If the late delivery is their fault, they pay the late fee.

• Check to see how far back you can access your bills and payment information online. Check for access fees for older account information.

• Report generation (i.e. tables, charts and/or graphs) helps you track where your money is going.

• Choose a well-established service. PC World suggests looking at sites that are stable (that are owned by Fortune 500 companies or are trusted brands) and offer 24/7 customer service. Online bill payment isn't where you want to go with a company that has no track record.

Lastly, many companies allow customers to pay their bills online through the company's website with no additional fees. If you have only a few bills each month, paying them online at the company's website might be the simplest solution.

Our Consensus Report shows how many times products are top-ranked by reviewers included in our
All The Reviews Reviewed chart.

# of Picks	Service (With Retailer Links)
4	CheckFree.com through your bank (Free)
2	Paytrust.com (*est. $5 per month plus 50¢ per transaction)
2	PayPal (Free to send payments)
2	Google Checkout (Free)
1 each	Quicken Bill Pay, MSN Bill Pay

You used to have to go with a paid service if you wanted to pay most or all of your bills online. But these days, so many banks and credit card companies offer free online bill payment that it only makes sense in certain situations to pay for such a service. Those who spend a lot of time traveling might consider Paytrust.com, which actually serves as your billing address for your creditors, who send all your bills to Paytrust instead of to your home. This greatly decreases your chances of missing an important paper bill while you are out of town. PayPal is an online wallet, not an online bill pay service. Though you can pay many merchants through a PayPal account, the vendor must accept PayPal. So you generally won't be able to pay your water bill or cable bill online with PayPal (unless it's accepted by your particular utility).

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