Bring Your Bills Under Control

The importance of paying bills on time is general knowledge, but with the slew of bills we all have to deal with--from mortgages to utilities to credit cards to cell phones--one can easily slip through the cracks. Here are some strategies to avoid late payments (and the fees that accompany them) and minimize stress.

1. Schedule all bills to be due at the same time of the month. Many bills allow you to change your due-date. Select a due-date a few days after you receive your paycheck each month. Designating a "bill day" will keep you from worrying throughout the rest of the month and ensure that bills do not fall under the radar.

2. Set up automatic payments. Automatic payments ensure that you will not miss a payment, but they are not a license to stop thinking about your bills. You may find that it makes sense to automate some of your bills and not others. Bills that are the same every month, such as your mortgage or gym payment, are prime candidates for automation. Payments that vary monthly, such as credit cards, are better suited for manual payment so that you can examine the bill--and your spending habits--before signing off.

You have three basic options for making payments online:

• Pay through your bank. Most major banks and many smaller banks offer online bill-pay portals where you can set up all of your automatic payments in one place. This service is often free--check with your bank to see what it offers. This is an attractive option because you can see all of your account payments in one place. If you have a dispute, it will be easy to work with your bank and the vendor.
• Pay directly through the vendor. You can set up automatic payments through each vendor directly. This may not be an option for every single bill, but most utility and other service providers allow you to program payments through their websites. The drawback is that your bills and payments will be spread across different websites, each with login information to remember.
• Pay through a third-party service. If you do not have access to such a service through your bank, there are several third-party providers you can use. The most well-known is CheckFree. The drawback to using a third-party is that it adds an extra step between the account you are paying from and where you are sending the bill, which can cause confusion and delays and make resolving disputes more complicated.

Regardless of the option you choose, you can typically set the payments to either charge a credit card or directly withdraw funds from your bank account. There are three advantages to using a credit card: You can earn rewards, you avoid the risk of overdrafting your account, and you have more protection in terms of disputes and errors since you have not actually parted with your money yet.

Caveats about automatic payments:

• Do not stop looking at your bills. You still need to examine each bill to check for accuracy. Maintain records of every bill you receive, whether you decide to file them in paper or electronic form.
• Keep an eye on the account from which payments will be drafted to ensure you have adequate funds. Maintain a cushion of cash in your account to protect against unexpectedly higher bills. Check your account after the payment as well, to ensure it processed and the amount matches the charge you expected. Under federal law, you have 60 days to report unauthorized billings, but you should report them as soon as possible.
• If you are paying from a credit card, check the card expiration date. Make a note on your calendar to remind yourself when you need to update your accounts. As always, make sure you pay off your credit card each month or interest charges will quickly overshadow the rewards.

3. When bills come in the mail, deal with them immediately. If you have scheduled an automatic payment, file the paper bill for your records. If the bill is not one you pay automatically, either pay it right after you open it, or designate a place for pending payments and set aside a day each month to pay your paper bills. Do not stack bills with other mail to deal with later, or you risk losing or forgetting them.

4. Give yourself wiggle room--schedule online payments for two to three days before payment is actually due to ensure adequate processing time.

5. Regularly review your account balances. Services that allow you to see all of your accounts in one place make it easier to stay apprised of your overall financial standing. In addition to allowing you to schedule automatic payments, online bill-pay services have the added benefit of presenting all of your bills in one place. Although not a bill-pay service, Bundle.com (which is a Morningstar partner company) is another free, helpful tool that aggregates all of your account information in one place.

6. Reduce your junk mail to lower the risk of losing bills in a mess of envelopes. Opting out of prescreened credit offers is an easy, free way to reduce the amount of junk you receive. There are also other services, though not all are free, that allow you to opt out of catalog mailings. One free option is Catalogchoice.org.