Automating Bills Using Online Bill Payments

This is a post on personal finance inspired by Ramit Sethi’s I Will Teach You To Be Rich. In this series, I am documenting my attempt to put the techniques in his book into practice.

On Ramit’s recommendation, I have a Schwab High-Yield Investor Checking account, which offers a bunch of great features. One of them is “free online bill pay.” It’s funny because my old checking account also touted this feature. It was something I heard and promptly ignored. Ramit’s book suggested using this free feature to automate paying most of my recurring monthly expenses.

My problem was that I never really realized what this “online bill payment” service actually is. It’s basically a service that you can use to make payments to nearly anyone in the country without having to write a check. For some reason I was under the impression that this meant I needed to know information about their company’s bank account, and I had no intention of calling my utility companies to find out that information. In reality (at least with Schwab), bills can be paid in a number of different ways. Often times, utilities and a bunch of other companies supply their account information to banks in order to facilitate electronic bill payment services. I assume this is because it means the company then gets regular on-time payments. In Milwaukee, I can pay my Time-Warner Cable/Internet and electric bills this way, in addition to many other services that I don’t use. I just have to put in some basic information and my utility account number. However, you can use bill payment services to pay basically anyone. If Schwab doesn’t know the company’s (or person’s) account information, they mail a check that will arrive by the date you specify. So for example, let’s say that you pay your child’s babysitter $200 per week. You could enter her name and address into the bill payments center and then you could pay her using bill payments. She would receive a check in the mail on whatever dates you specify.

There are a few different ways to make payments. First, you can manually enter in a payment amount and payment date. This is obviously useful for bills that are for different amounts every time or ones that don’t need to be paid regularly. Second, you can set up automatically recurring static payments. This is really useful for something like rent. Enter your landlord’s name and address, and ask the bill payments center to make sure that your landlord receives a check by the first of every month. Since the Account Number field is customizable, you can enter your address as an Account Number and it will appear on the check. I just set this up for my landlord, and I’m truly excited about never having to worry about paying my rent on time again. Third, some utility companies and credit card companies can forward you e-statements and e-bills through the bill payments center. In this case, the bill payments center knows how much you owe every month, so there’s no need to enter it manually. You can direct it to pay all or part of your bill every month before it’s due, even if the amount changes.

Money Wheel

CC-BY by Andrew Magill

Before I continue, let’s address the elephant in the room. You’re sitting there saying to yourself, “Man, it would be great to never have to worry about paying my rent on time, but I’m afraid I won’t have enough money in my checking account to cover the check.” I know this because I can hear Sadie worrying out loud about it to me. It’s a valid concern, but it’s not as big of a deal as you might think. The bill payments center has customizable reminders. You can use them with or without automatic payments. Meaning, you can have the bill payments center send you an email on the 20th of every month to remind you to pay your rent. You can then manually log in, check your account balance, and then manually submit a payment afterwards using the bill payment center. Alternatively, you can set up an automatic payment but still have them send you a reminder. The reminder would be your bank sending you an email saying, “Hey, we’re sending out a check in a few days for $900 to pay your rent. Let us know if you want to change that.” This would remind you to log in and make sure there’s enough money in your account. If you realize that your account won’t have enough to cover the check, you can also cancel the payment before it’s sent and make alternative plans for paying it. You can also make changes if for some reason your bill is different from normal this month.

Of course, if you use Ramit’s automation plan, you shouldn’t be too worried about not having enough money in your account. He advocates changing all your bills’ due dates to early in the month so that your bills get paid right after you do (assuming you get paid on the first of the month). But mistakes do happen and fortunately he also discusses techniques to get things like overdraft fees waived if you make a rare mistake.

I do worry about delays with the mail and postal service holidays, so I simply make my payment arrive a few days before it’s due. If you’re worried about automating something that could potentially become too big of a bill, like your credit card, adjust your payment if you have to. In the long term, try to identify and rectify why you’re spending more than you’ve budgeted.

This automation makes me genuinely excited about getting started with paying my bills. It also helped me understand the brilliant online bill payment system. This is going to make paying my bills much easier, and more importantly it will relieve the stress of always wondering if I forgot to pay a bill this month. My bills will be paid automatically, so I won’t even have to think about them. What a novel idea! This stress relief will be a major advantage during residency because thinking about bills is the last thing I will want to do with my time off.

Bills automated: Rent, Internet, and Credit Cards (Sadie pays for power). Anything that’s not automated is paid via credit card and the credit card is paid off in full every month.

Overall, I can see this system working very well for me. In addition to just being easier, the automation will help make sure that I never miss a payment. As residency gets more intense, it will be more likely that I’ll forget to send in a rent check one month or miss a due date for my Internet bill. Automating everything means that will never happen. Since we’re paid monthly, I am scheduling all of my bills to be paid a few days after I am paid. That way there is always enough money in my account to cover my bills. I am also finalizing my plans for saving and investing, which will happen automatically too. And finally I am finalizing my Conscious Spending plan, which I’m working on putting into practice this month. These are all topics for future posts though.

Do you have comments, questions, or objections about something I’ve described? If so, let me know in the comments!

4 thoughts on “Automating Bills Using Online Bill Payments

  1. While I like the potential of automatic bill pay, I don’t like the way it actually works. The money is taken out of my account as soon as I send the check rather than when the person deposits it. While I know there is a way to check the status regarding whether it was deposited or not, I find it too cumbersome and it takes too much time from the time I “wrote” the check to the time the company actually gets it. I am never absolutely sure whether I will be considered late or not.

    My solution has been paying my bills directly from the company’s website. Most, if not all, have this option. The downside to this is that you actually have to remember when to log on to that side, knowing the log-on Username/pw. For the companies that don’t have this option, I set up an automatic withdrawal from my bank account. For the companies that do, I set up a google docs spreadsheet with due date, company, date I paid and confirmation number and notes rows as soon as the bills come in, I enter in into the spreadsheet. Creating a sheet within the file also has my Username/pw changed around a bit so not to make it too obvious. I (and the ppl I share it with) can check the spreadsheet and get a good sense of when each bill is due, what my bank balance should be, and what is upcoming. I also know exactly what day the funds are going to the drawn out of my account along the actual posting date so I never get a late payment. I never have to go back into my pile of bills to sort through and I always have a record as I copy and paste my monthly details plus conf. # into another sheet every 2-3 months. I can also look back at each month and see if there is a bill I missed or if it hasn’t yet been withdrawn from my acct yet. Also, I keep track of my checks I write as well and enter that in as a bill and log it in when it is withdrawn from my bank acct.
    (I know this is waaaay to long of an answer, let me know if there’s something that doesn’t make sense)

    JJ

    • I’m not sure how it works at your bank, but with Schwab if you schedule a payment in advance, they get the payment via mail to the destination by the payment date. So if I log on and try to send my landlord a payment, I can’t choose a payment date of tomorrow. The earliest I can choose is about 2-3 days in advance. They mail the check early, but make it payable on the date you choose. They also withdrawl the funds from your account on that payment date.

      For example, I requested that they pay my first rent payment, which was due June 30th. I submitted the payment request on June 27th. I checked with my landlord, and they received the check, as scheduled, on June 30th, and the funds were deducted from my account on June 30th.

      I can understand your concern of not being able to tell whether it got there on time. Who knows if there’s going to be a mail glitch or something. So I now choose a date that’s a few days earlier than the true due date, the 27th of the month. That way it’s sure to be there on time even if the mail gets delayed. I agree that it’s a little nerve-wracking to not have confirmation of a payment.

      I don’t really care about seeing whether they’ve cashed the check. In fact, even if I wrote them a check, it probably would take a few days to come back to my bank. And actually, I think this method is better. Once the check arrives, the funds are deducted from my account. This saves me the headache of having someone sit on my check for 4 months. I recently had this experience with the Rush Training Center, where they didn’t cash my CPR training payment until 3.5 months after I gave it to them and completed my training.

      I agree that paying from the company’s site may seem a little easier, and sometimes it is. I still do that for a few things. I was surprised by how many companies can be paid electronically from Bill Pay though, and sometimes there are other advantages to paying with Bill Payments. For example, Schwab offers a few more options than Chase for paying my credit card bill. My credit card bill is automatically imported into Schwab, so the Payment Center knows how much I owe each month. In it’s online payments, Chase lets me choose to pay either the full amount or minimum payment on the bill’s due date. Using Schwab’s Bill Payments, I can choose to pay either the minimum payment or the full amount but I can pay either as soon as I receive the bill or on the bill’s due date. This works really well for me because Chase sends my bill about 3.5 weeks before it’s due, and I’d rather not wait that long to pay it. It also allows me to set a maximum, so that if my credit card bill is say greater than $1000, it sends me an email asking if I’d still like to pay the entire thing.

      As for your technique for keeping track of due dates, I suggest you check out Ramit on automating your accounts if you haven’t read his book. A good automation technique will save you a lot of time and headache 🙂

      • I have a quick question – do you see on your charles schwab account when the party has cashed the check? Like, does it appear as a transaction? Or is there just no way to tell they’ve received and cashed the check? What happens if you send a check but they don’t cash it or wish to cancel it or whatever? Does Schwab ever refund those money that hasn’t been cashed?

Leave a Reply

Your email address will not be published. Required fields are marked *