The post office recently announced that first-class mail now has a 5-day expected delivery time frame rather than the 3-day time frame. I know I have seen it both at the office and home, where we have not received delivery in a week. With the current amount of online shopping package deliveries and the shortage of postal employees, getting bills in the mail timely and having your payments be delivered timely is a gamble.
Paying bills other than through the mail is becoming more prevalent. If you are not already using some of these options, you may want to consider starting.
First, I want to talk about some of the myths and fears regarding these payment methods.
I often hear I do not want these companies to have my banking information. Think for a moment; if you send them a check to make your payment, they already have access to your banking information. Often businesses are now making mobile deposits. They scan your check and submit it digitally rather than deposit it at the bank – similar to the mobile deposits that many of us are doing.
Please do not kid yourself that you are protecting yourself by not providing that information to them to make an electronic payment that you are keeping them from knowing your bank account information.
I often hear, what if they do not take the right amount? Large companies are processing hundreds of thousands, if not millions of these transactions a year. If they were processing incorrect amounts, it would create a public relations nightmare for them, not to mention a significant number of lawsuits. These companies are cautious only to take what they have been authorized to take.
I often hear I cannot control when a payment is made. What if there is no money in my account and the payments bounce? Online bill pay where you send the payment rather than the company coming to get the payment solves this concern.
There are two methods of buying bills electronically. One – you request the company to come and get the payment. Two – you electronically send the payment to the company.
In both cases, you can choose to get paper bills, or you can choose to get your bills electronically. I know several individuals get their bills electronically and do not print them. I would suggest that you at least save a pdf version to your computer, so you have access outside of the company’s website. Many websites only provide access for 12-24 months, and then you lose that access. If it is a company that you stop doing business with, you may lose access to prior statements.
You can, of course, continue to get paper bills. This means you will not solve the problem of making sure that you get bills timely. It could also be that this is the part you are willing to do and is the only step you are willing to take at this time. If you are willing to get your bills electronically, you will get them timely without depending on the postal service.
One of the methods of paying bills electronically is setting up with the company to have them come and get the funds out of your bank account on the day the bill is due. Typically, there is a spot on the bill itself or its website to complete banking instructions. You would fill in the bank’s RTN, which is the 1st nine digits on the bottom of your check. This tells them what bank you use.
The second set of numbers is your checking account number. The last few digits are your current check number, so do not include that. Your account number is all the digits between the micron symbol after the RTN until you get to the micron symbol preceding the check number. With credit unions, this may be longer than what you know as your member number. For almost all financial institutions, this account number is not the same number that is on your debit card. It should be the number from the bottom of a check.
Once you submit that information, generally with the next bill, you will see a note that says “auto-payment,” which means they will come and get the payment on the due date. Sometimes, it comes out of the account a day or two after the due date because of a weekend or holiday. The company will consider it timely if it takes it after the actual due date. Your only function is to make sure that the bank account has the funds when they come to take the payment.
With this method, you control when the payment comes out to the company. If you prefer to control when the payment goes out, you want to use the 2nd method below.
Under the 2nd method, you will use the bill pay option on your bank or credit union’s website. For each bill, you would enter the billing information one time – who you want to pay, your account number with that company, and the address to which the payment should be mailed.
If the payment is the same amount every month, you can enter it as a recurring payment, and it will be set up to go out on the date you indicate automatically. If the payment varies each month, you will need to go into the bill pay system to enter how much you want to pay for that bill each month.
Most online bill systems ask you to enter the date you want the bill to arrive at the company rather than asking for the date you want it sent. The payment will be sent via ACH if it is a larger company. Being sent ACH means a direct bank to bank transfer – usually, that is a 2-day process so that the funds would come out two days before the due date.
Some smaller companies will not be set up in your bank or credit union’s database. In this case, the institution will need to mail a check to that company for you. You will be saving the need to write out a check and the postal cost since you are not charged for the mailing. There would now be mailing time involved – this means the payment is likely to come out of your bank account a week or so before the actual due date to manage mailing time.
Under this 2nd method, you retain control over when a payment comes out since you are responsible for entering the due date.
You can choose to use the 1st method for some payments and the 2nd method for other payments. A third option that can be used for some bills – have the payment go to your credit card. You can only be concerned about making one credit card payment instead of three, five, or seven different payments. I strongly recommend only using this method if you faithfully pay your credit card in full each month. You do not want to add to the amount of interest you are paying each month by adding everyday bills onto the balance.
We see two types of clients – those that keep a substantial amount of money in their checking account and those running close to a zero balance in their account most of the time.
An option for either type of client to manage online payments that might make you more comfortable is to, rather than have these payments come out of your main checking account, have these payments come out of a separate bank account. If you direct deposit funds into this secondary account to cover your monthly bills, you know there will be money in the account. You can then “live out of” what is in your checking account for groceries, gas, household, and other expenses. These can be items you would write checks out for when at a store or on location. These would be expenses you would pay using your debit card. It would allow you to know what you have available to spend while knowing that all your monthly bills can be paid by what is in the savings account.
Do not be fooled into thinking you can limit who knows your banking information by not conducting electronic transactions. Think of using the electronic payment methods to decrease your stress, make keeping your financial life on track easier, and to automate payments to spend less time. Setting it up and getting it in place can take a little time. Once done, it will take far less time to manage your finances. If we can be of any help or assistance at Planning with Purpose, please reach out to us.