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Your online bill payment options
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But electronic payments sometimes can be held up when they have to be processed manually. This is the case with smaller, less automated billers. For example, if your gas company doesn't accept electronic payments, your payment aggregator must cut and mail a paper check. If that paper check doesn't have the required back-up slip of paper documenting the transaction, it can get stuck in limbo for several days.

As for security, it's not a big worry for most electronic payment aficionados. All types of online financial transactions are routinely encrypted to help reduce the possibility of identity theft.

"It's a more secure situation," Utt says. "I'm more comfortable paying bills online than having a waitress carry around a receipt with my credit card number on it."

A recent identity theft study by Javelin Strategy & Research, a company that advises businesses in the financial services, payments and commerce sectors, agrees. Since much financial fraud occurs when private data (checks, credit cards and account statements) are stolen from mailboxes, the Javelin report argues that electronic bill payment can actually reduce the chances of identity theft.

In addition, bill payment sites offer guarantees. For example, Wells-Fargo offers a "100 percent security and payment guarantee," says Jim Smith, senior vice president of consumer and Internet products.

Picking a preferred method
So you're ready to go electronic with your bills. But just which way is best? That depends -- on you, how many of your billers accept the payments, how much attention you want to pay to the process once it's set up and, of course, the costs.

The most convenient method of paying bills electronically is through a bill consolidator or aggregator. Using your bank, for example, means you fill out electronic forms once and have only one password and user name to remember.

In addition, many bill aggregators offer services such as bill notification where you'll get an e-mail when a bill comes due, as well as control over how you make the payment. You can have the payments made automatically or you must approve the amount and date the payment goes through.

Finally, if you use your bank, you have all your checking account information on hand when paying bills. That way you'll know if you have enough money in your account to pay your mortgage or other bills.

Just make sure the fee to pay through your bank or a third-party aggregator fits your budget.

Going to each biller directly isn't as easy as the one-stop aggregation method. You have to set up accounts with each vendor, learn how to navigate each system, remember separate user names and passwords and visit each site monthly to pay. With the average American household paying 15 to 20 bills a month, maintaining that many online bill payment arrangements can be time-consuming and potentially confusing.

However, with biller-direct payment, you can check on each account's status when you go to pay. That way, you can verify the charges before the money is transferred.

For automatic payments, credit cards score high. Establish an automatic payment of that $48-a-month health club membership via your Visa, and you're all set. Nothing to remember or to forget, and you can pay multiple bills at once as with a regular aggregator. If you prefer, most credit cards also give you the option to manually pay the bills each month.

The downside of automatic credit card payments: If you don't pay your account in full or on time, you'll be hit with interest charges or late fees. But you can earn bonus points or other award-program credits by regularly charging a bill to your card.

Jenny C. McCune is a contributing editor based in Montana.

Bankrate.com's corrections policy -- Posted: April 22, 2005
More stories by Jenny McCune
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