What Is Online Bill Pay?

Man paying bills online
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Online bill pay is a digital banking or payment service that lets you pay bills over the web from a bank account—often at no extra cost. It can simplify your finances by eliminating the need to write out checks or count and distribute paper currency.

Key Takeaways

  • Online bill pay is a convenient service offered by many banks, credit unions, and service providers, allowing you to set up automatic electronic payments for your bills.
  • Payments can be set up for one-time, future, or automatic recurring transactions.
  • To use this service, you will need to create an online account with your bank or service provider and provide your payment information.
  • Always be sure you have enough money in your account to cover any payments you make online.

Definition and Examples of Online Bill Pay

Online bill pay is a service that allows you to set up electronic payments for your bills online. This service can usually be set up through your bank or directly through service providers. For instance, you may set up online bill pay through your bank or service provider to pay your electric, water, and gas bills—and more.

How Online Bill Pay Works

To set up online bill payments, you'll need to create an online account with your bank or service provider and then set up your account for payments.


With the bank model, you give your financial institution information about recipients to whom you owe money, be they another bank or a business, and the bank sends money to them.

Depending on the payee, the bank will issue an electronic payment or a paper check using funds drawn from your designated account within a few days after you schedule the bill pay. Many banks impose no limit on the number of bills you can pay through the feature.

Service Providers

This online bill pay system works like the bank system, but in reverse. You give phone companies, mortgage companies, utility providers, or other service providers your bank account information so that they can withdraw from the account to pay for the their services.


Electronic payments often reach payees within two days or less, whereas paper checks can take several days, depending on the bank.

How to Set Up Online Bill Pay with a Bank

To make payments online through your bank, log into your bank's website, and go to the Bill Pay section. Click on the relevant link to add a new payee, and then type in the name of the recipient company. You’ll need a copy of a bill issued to you by a service provider so that you can copy the address and your account number, along with any other essential information, from the bill.

Enter the desired payment amount, and schedule and complete the setup sequence. Thereafter, each time you want to make a payment, simply enter the amount of the bill, and schedule your payment.

How to Set Up Bill Pay With a Service Provider

To establish online bill payment with a service provider, you’ll often need to provide bank account information such as your account number and any routing numbers associated with the checking account, either in the authorization form or separately, to grant the company in question permission to withdraw funds from your bank account. In some cases, you may be able to supply your debit card information instead of a checking account.

Again, you will be asked to specify the payment amount and schedule before you complete the bill pay setup. A typical payment date is the bill due date for the company, but you should confirm that your payment will be credited as on time. Once things are up and running, payment will go directly from your bank account to your service provider.


To be safe, individually verify the online payment instructions or requirements of each payee, be it a bank or service provider.

How to Choose Online Bill Payment Types

Once you set up the payment system, your bank or service provider will generally give you the option to make one of a few useful types of payments through online bill pay:

  • One-time payments: As the name suggests, this is a payment you issue a single time. This option makes sense for services you use infrequently, such as a landscaper or a lump-sum payment on a car.
  • Future payments: This online bill pay option gives you the ability to schedule payments at a later date. Use this online bill payment option when your bill due date isn't in the near future, but you want to set up a payment in advance so that you won't forget it later.
  • Recurring payments: These are generally payments you make at regular intervals, such as monthly or quarterly. Examples include health insurance premium bills, utility bills, or monthly bills for childcare.

Automatic Online Bill Pay

If you love automated processes that don't require your constant attention, then automated online bill payment, which facilitates one-time or recurring payments on a regimented basis through a bank or service provider, might be for you.

By automating one-time payments, you can authorize your service providers to pull money from your account for irregular, one-off expenditures without any activity on your part. For example, you can have your bank automatically make payments on a seldom-used credit card whenever the card accrues a non-zero balance.

If you automate recurring payments, your online bill payment service can pay your monthly phone bill or your quarterly insurance payment. Automating online bill payment for regular expenses is a great way to pay on time and avoid incurring late fees.

In both cases, the service provider directly asks the online bill-paying company for payment as needed, and the payment is made without your involvement. If you authorize these types of payments, keep enough available funds in your account to cover them.

Online bill pay can save time, reduce paperwork, and make life easier, but it can also lead to a negative account balance and associated fees if you set up withdrawals that exceed your balance. Shrewdly budgeting and paying attention to your balance can help you make the most of this convenient banking feature.

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