It's easy, it's fast, but one slip up can ruin the ride
By Adrienne Samuels-Gibbs
If managed well, using your credit card or your online bank account to pay your bills online is a great idea that could manifest in anything from free plane tickets to actual cash back rewards. The upside to online bill pay is that you are more likely to pay your bills on time. But this convenience can have a dark side in that it sometimes breeds financial laziness, says Bruce McClary, a certified financial specialist with the Virginia-based Clear Point Financial Solutions agency.
"You still have the obligation to make sure that everything is accurate because nobody is checking for you," says McClary. "We see a lot of people get into serious trouble because they have 20 different accounts they are managing and they're trying to set up automatic pay. They end up falling behind on two or three or four of them and their credit is damaged through the oversight."
According to a 2007 Consumer Bill Payment Survey released by Harris Interactive and The Marketing Workshop, around 74 percent of Americans pay at least one bill online. The American Bankers Association also found that consumers are choosing electronic payment methods over everything else, with cash and checks only accounting for 45 percent of consumers' monthly payments in 2005, down from 57 percent in 2001 and 49 percent in 2003.
As more people discover the ease of paying their magazine subscriptions, utility and insurance bills and mortgages online, it is important to be vigilant at monitoring the transactions and to take note of ever changing due dates and minimum payments. Why? Because the ease of paying your electric bill, for example, online -- but then getting hit with a late fee -- can quickly erase any of the "perks" you could have received from any rewards program attached to your credit card (if paying via credit card), as well as possibly dinging your credit and ratcheting up what you originally owed. .
Here's what the experts have to say about the various forms of online and auto bill-pay, ranging from paying everything with your credit cards online to using your bank's online system to pay all the credit card bills.
Auto pay rules of the road
1. Is it free? Some banks and credit card issuers charge for automatic bill pay. Some don't. Do your research to find the right one for you.
2. If paying your bills with a credit card, pay off your balance every month. Don't be afraid to use your credit card as the auto pay option for your bills -- just be sure to pay off that credit card bill on time every month so as not to rack up your balance and any interest on that balance. If you sign up for a rewards program with your credit card and expect points (or miles) to accrue as you pay your bills, be sure to read the fine print as automatic bill payments don't always qualify.
3. Check due dates every month. Always check your paper or electronic bill and check your due date and minimum payment. Then be sure to reconcile what you think you paid out with what your credit card company or bank has actually paid out. "You always want to reconcile and make sure that what your account is saying is accurate," says Monica Beaupre, manager of public affairs for American Express.
4. Keep informed. Stay on top of memberships that require you to use a checking account or credit card for automatic payment, such as gyms. If you quit, be sure to tell your credit card issuer or bank representative. Some athletic clubs require a 30-day notice of a membership cancellation before the billing stops.
"You're in charge. If you cancel a membership or a subscription, remember to check your statements and inform the bank immediately if the charge still appears on your credit card or the money continues to be drawn from your account," says Pam Girardo, a spokeswoman from Capital One, in an e-mailed statement.
5. Take your time. Don't rush to set up auto-payments with a new merchant, bank or credit card. Take a few months to see if you like the services, if it's a legitimate company and if you are comfortable allowing the company to have access to your account numbers.
"You may not want to set up automatic payments right away," says Allison Brown, senior attorney for the FTC's division of financial practices. You might want to sign up for monthly movie theatre debits or monthly credit charges to pay for your monthly massages -- but hold off for a few months. The time you spend waiting -- and paying your bill via old-fashioned checks -- lets you know if you like the services provided and lets you know the company's level of professionalism.
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6. Know your rights. According to the Fair Credit Billing Act, if you dispute a charge on your card the card issuer is obligated to investigate or remove the charge. (That means that if you canceled your gym membership and the gym refuses to stop billing you, and your credit card refuses to stop paying that gym bill, you can take your argument to a higher power.)
7. Check and double-check. Don't set up a automatic monthly payment schedule for your credit cards without also scheduling your own monthly viewing of due dates for each bill. Unlike public utilities or mortgage lenders, credit card issuers might change your due dates, which may make one of your 15th-of-every-month payments a late payment. Says ClearPoint's McClary: "These credit card companies issue their bills on cycle dates and from month to month the cycle date may change."
8. Keep a paper or electronic trail. Sign up for electronic bills from billers, print them out and save them, or be sure to look at and file your paper statements. This way, if there are any discrepancies down the road, you have a paper or e-mail trail to follow.
9. Protect your identity. To prevent fraud, don't use easy-to-guess passwords to access your bill pay account, such as your spouse's name, your birthday or any other obvious bit of information. Also, change your passwords regularly.
Also, beware of spyware or keylogging software that can be installed on both your private computer and on public computers. The software can record your every bill-paying move, granting the "spy" instant access to your passwords and accounts. (Some key-logging software can even be installed remotely, so it doesn't matter if the person has access to your home.) For your personal computer, be sure to run anti-virus software regularly to find and destroy spyware. Some specialists say you should never use public computers to access your bill pay accounts.)
10. Is the bill-pay website secure? Check the bill pay website to see if it is "encrypted." If the site uses Secure Socket Layer (SSL) technology, which encrypts your personal information, you should see a locked padlock image as well as an "s" after the URL addresses on the pages that contain your personal information.
For example, on a CreditCards.com American Express card application page, the URL in the browser window begins with a "https://" instead of just "http://" (see sample). If the padlock symbol is open or unlocked, the site is not secure and you shouldn't enter any personal information.
11. Be accurate. Be sure to type in the correct spelling of the Web address for your bank or credit card issuer. Scam artists often make a bundle off of stealing information when you accidentally visit the "wrong" (i.e. phony) site and enter your personal information.
12. Log out. After paying a bill online, make sure that you use the "Log Out button" when you are finished. Then close your browser completely. This ensures that no one can use the computer after you and pull up your account information.
Published: September 24, 2008
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