A rich, uninterrupted carpet of bright green clover is one of the more pleasing sights to the eye of this veteran wildlife food plotter.
But the above photo represents more than just a nice visual. The typical three-leaf clover is also a perfect symbol of the three primary advantages of online bill pay.
Let’s take an up-close look at how this basic functionality can take the stress out of bill payment, save you some serious cash, and preserve our planet, all at the same time.
What Is Online Bill Pay?
Unfamiliar with the concept of online bill pay? No worries, the learning curve isn’t steep. Online bill pay is simply the act of paying a bill electronically, most frequently through an account created on your service provider’s website.
Similar to online banking, this often requires the use of a user name and password linked to your account and billing profile. Paying a bill is as simple as configuring an electronic funds transfer (EFT) from your checking or PayPal account or paying with a debit or credit card.
De-Stress With Online Bill Pay
Have you ever made
a mad dash after a dignified request of your mailman or woman, and attempted to flag him or her down to provide him or her with a must-be-mailed today bill payment?
No? What about racing traffic and the clock in an effort to make it to the local Post Office before closing in order to drop off the same?
I don’t know about you, but neither of the above are on my top 10 list of most relaxing pastimes. Read on to learn how online bill pay can serve as the financial equivalent of a hammock and lemonade in the shade, taking the stress out of your bill pay system.
Pay It & Forget It
If you’ve ever mailed a bill payment and simply crossed your fingers that it would arrive by the due date, been on pins and needles watching your bank account in an attempt to determine whether your payment was received on time, or put a strict moratorium on all spending until a given check cleared your account, you are already all-too-familiar with the potential stresses of paying bills by check.
The beauty of most online bill payments is that if made within normal business hours, they are usually processed the same day. This creates a pay-it-and-forget-it utopia compared to the nightmare scenarios above. Simply ensure you have the required cash or credit in your account, make your payment, and be done with it. Bill payments are painful enough as it is without hanging over your head for a week!
Extend Your Personal Grace Period
The average American pays 4.56 loan repayment bills late every year, meaning that in any given month there’s a 38% likelihood of this occurring. When paying bills by check, this is only made more likely by mail handling and delivery time-frames.
For example, this USPS map tool indicates that First Class Mail originating from my location can take as long as three business days to make it to all areas of the continental U.S. And don’t forget that even the best-laid bill payment plans can be sabotaged by an unexpected and under-the-radar Federal holiday.
Most online bill payments made during regular business hours are processed that same day. This means cutting out the USPS middleman can effectively extend your personal bill payment grace period by up to three business days.
How Online Bill Pay Can Save You Money
Increasing your personal grace period can result in major savings. Just one late credit card payment avoided can save more than $14,000 in additional interest costs resulting from a penalty interest rate, not to mention the fallout from the associated credit score hit!
We also learned in the last article that the average American pays 14.1 bills per month, the equivalent of 169.2 per year. Assuming that all of these bills are paid via snail mail, that makes 169 checks, stamps, envelopes, and return address labels per year that could be avoided.
So just how much potential savings does online bill pay hold for the average American? Would you believe me if I told you the potential savings exceed $130,000 over the course of the typical adult lifespan?
Check costs vary by bank, but a BankRate.com study found the price per book of 120 checks to be $25 or more. My own local bank charges $23.92 for a book of 100 checks through Harland Clarke. You can find checks cheaper online, but let’s assume the typical American who is paying more than four bills per year late isn’t quite that savvy. Using $25 per 100 checks as a baseline, that’s $.25 per check or $42.25 per year.
After the recent price increase, stamps are now an even $.50 apiece. This puts our annual bill pay postage total at $84.50 unless all of our service providers are kind enough to provide prepaid envelopes with our bills.
What about envelopes? For some bills, these may be provided for you. For others, they may not. Unfortunately, those that are certainly aren’t going to be of the security-tinted variety. Since we’re both security-conscious and not fans of licking the glue on 169 envelopes per year, let’s use these security-tinted and self-sealing envelopes from Amazon for price comparison purposes. $8.99 for 100 envelopes works out to $.09 each, or another $15.19 per year.
Return Address Labels
Since it’s doubtful anyone wants to painstakingly fill out 169 return addresses per year by hand, we need to factor in the cost of return address labels. Amazon offers 500 basic labels for $9.94 with shipping, a price of 2.0 cents apiece. That puts our annual cost at $3.36.
Do you buy your checks at your local bank? Stop at the Post Office to mail critical bills or purchase stamps? Drive to local utility providers to pay bills in person? The IRS puts the cost of driving at 53.5 cents per mile. Insurance provider AAA estimates the costs of transportation at 73.54 cents per mile once maintenance, insurance, and depreciation are fully factored in.
So Where’s My $130,000?
According to the above calculations, the average American who pays all of their bills by mail can save $145.30 per year in postage costs alone by enrolling in online bill pay. That’s about $12.11 per month. This number doesn’t take into account transportation costs or the potential prevention of late fees and a ruined credit score, which often has an impact in the thousands of dollars.
Think $12 bucks a month doesn’t sound like much? Consider that if an 18-year-old high school grad just learning the bill pay ropes utilized online bill pay rather than snail mail they could save $60,787 by retirement at age 68 if they invested the difference, based on the inflation-adjusted 7% average rate of return of the U.S. stock market over the last 100 years.
Preserve The Planet With Online Bill Pay
The rather fascinating 2016 Household Diary Study conducted by the USPS found that Americans send 3.7 billion bill payments through the Postal Service annually (page 27) due to paying 26.6% of all bills by mail (page 31).
Another USPS study titled Environmental Impacts Of The Mail found that 5.4 million tons of mail are discarded after use annually, constituting 13% of all paper and paperboard waste in the U.S. The report also found that energy use related to mail delivery totals .6% of that used nationally.
Add the environmental impact associated with producing, marketing, and transporting checks, stamps, envelopes, and return address labels and you can start to see how this all adds up to much more than the few clicks of the mouse associated with online bill pay.
Is Online Bill Pay Safe?
Credit reporting agency Experian reports that paying bills online may actually be safer than the alternative of putting a bill and check containing sensitive information in the mail due to the ability it confers to monitor the status of your payments and eliminate the paper trail.
The Balance makes the case in their article on the safety of online bill pay that it is far safer than things many do without a second thought, such as handing a credit card to a waiter, waitress, or cashier.
That said, since you will be using bank account or credit card information in the course of online bill pay, you’ll want to employ all of the same precautions used for online banking:
- Take advantage of multi-factor authentication if available.
- Verify that your service provider’s bill pay portals use secure SSL encryption.
- Don’t pay bills over unsecured, public WiFi connections like those at coffee shops or hotels.
Implementing online bill pay doesn’t take much effort, and the rewards are well worth it. If you currently pay bills either in person or by mail, consider converting to online bill pay instead. Doing so will streamline your money management, result in lower stress levels, save you money, and help preserve the planet.
It will also help you take full advantage of Mint’s ability to track the balance and due date for each of your bills, which is possible only if you’ve enrolled in online bill pay with your service providers. Even if you don’t intend to pay your bills online, enrolling in online bill pay with each provider will enable Mint’s bill tracking and alerts to be much more accurate on your behalf.
For those of you who have been following the Master Your Money series from the beginning, below are the next steps on your journey to financial freedom:
- Calculate your potential savings from online bill pay using this compound interest calculator in combination with a $12.11 contribution per month, 7% rate of return, and the difference between your age and your life expectancy.
- Use your previously collected bills to locate the websites of your service providers and sign up for online bill pay.
- Use your new account credentials to replace all related “offline” bills in Mint with new “online” versions, which automatically track your balance and due date and enable payment directly from Mint.
- Explore the details of each service provider’s online bill pay structure. Verify that there are no related fees – some providers charge fees for some payment types, but not others.
- Begin paying your bills online via your provider websites or by using the “Checking” payment option in Mint for all “online” bill types.