Posted by Lending Club :: December 18, 2007 @ 6:18 am

My recent post on the identity theft risks of mailing bills got me thinking more about the way I pay my bills online. I use a variety of methods that I would like to share with you.

When you talk about online bill paying, there are a number of ways to do it. You can use transactions initiated by banks, transactions initiated by service providers, or automated payment systems. I use a combination of all three.

Even though I pay all of my bills online, I still receive paper copies of the bills in the mail. I find that doing so keeps me more involved in my finances and helps me to track (and remember to pay) my bills better. I regularly monitor my accounts electronically to ensure accuracy. I do this for my bill accounts, my accounts at financial institutions, and even my Lending Club P2P loan portfolio.

For bills that are consistently the same every single month, I pay with automatic payment. That means that the cost of the bill is automatically charged to my credit card on the due date. My credit card is my preferred method of payment because I earn travel rewards with every dollar I spend and I always pay my balance in full each month. If I couldn’t afford to pay off my bill each month, then I certainly wouldn’t use my credit card. Travel rewards are hardly worth the fees and interest charges that carrying a balance would incur.

As I said, I only use automatic payments for bills that don’t change. A quick look at my statement shows that the proper amount was charged each month. For bills that do change, I like to have more control over the payment. I wouldn’t want a bill with an error in the amount due to be automatically charged. For all bills that can be paid online with a credit card, I go to the provider’s website and pay using that method. Again, I only use my credit card because I get something for it (reward miles) and it doesn’t cost me anything since I pay my bill in full.

For bills that do not accept credit cards, or those that charge a fee for using a credit card (about $3 is typical), I pay from my bank’s online bill paying area. I prefer initiating debit purchases from my bank to giving service providers my banking information. Unlike credit card transactions, which can be disputed, debit transactions take money out of my account when they occur. Recovering money that was taken incorrectly is a more difficult process than disputing a credit card charge, so I prefer to have my bank initiate any such transactions.

By using a combination of automatic payments, service provider initiated transactions, and bank initiated transactions, I have created a bill paying system that offers me the right amount of control, flexibility, and benefits. Your combinations and methods will likely be different depending on your situation. Whichever method, or methods, of online bill payment you choose to use, the process will likely save you time and money and make your bill paying experience more pleasant.