How does online bill pay work?

Young Asian man at his laptop, mobile phone in hand, using online bill payImage: Young Asian man at his laptop, mobile phone in hand, using online bill pay

In a Nutshell

Online bill pay allows you to pay your bills quickly and easily. Just make sure you have enough money in your account to cover your bills to avoid overdraft fees.
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If you need to a pay bill, paying it online is likely the cheapest and easiest way to do it, if that’s an option.

With online bill pay, there’s no need to purchase a money order or write a check and then track down stamps and find a mailbox. You can set up online bill pay through your bank or credit union to electronically pay utility bills, rent and other expenses.

Taking advantage of online bill pay is easy, if you already have a bank account that you monitor online or with your cellphone. But if you don’t have online access to your bank account yet, you can usually sign up for online banking through your financial institution’s website.

What is online bill pay?

Online or mobile bill pay is a service that lets you pay bills electronically through your bank or credit union’s website or app. Paying bills online is a popular payment method — according to a 2020 survey by the Federal Reserve Bank of Atlanta, 47% of U.S. consumers use online banking bill pay services.

If you can access your checking account online or via app, you can probably use online bill pay. To use online bill pay with your bank or credit union, you’ll provide the account information for the companies you want to pay.

How to set up online bill pay

Setting up online bill pay is easy. If you already have an online bank account, it can be done in just a few steps.

  1. Sign into your online account. If you haven’t logged into your account before, you’ll need to create an online account with a login and password. Your bank or credit union will often allow you to access your account after you enter your name, account number, Social Security number and birth date.
  2. Locate the bill pay section. The bill pay feature may be located under something like “Transfers” or “Payments.”
  3. Add a new payee. Enter the information for the person or company you need to pay. Banks and credit unions usually have networks of companies they can pay electronically. If the company or individual isn’t in its network and you don’t have the option to set up electronic pay, the bank or credit union will typically mail a check for you. 
  4. Confirm payment amount and date. If you have recurring bills, such as your cellphone plan, you can also enroll in automatic payments. Setting up automatic payments is one way to help ensure your bills are paid on time.
  5. Schedule your payment. Online bill payments can take a few business days to process, so try to make payments a few days before they’re due.

Is online bill pay safe?

If you’re used to paying your bills in person or by mailing a check, you may be worried about paying your bills online. However, online bill pay is generally a safe way to make payments.

Most online banking platforms use multifactor authentication, which requires you to confirm your identity using two different factors. For example, you may be asked to enter your account password and then provide a code that is sent to your phone. This makes it difficult for someone who doesn’t have access to your account and personal information to sign in and make changes.

In addition, online banking platforms use encryption technology to protect your information as it’s being transmitted. This means that even if someone were able to intercept the data, they wouldn’t be able to read it.

Finally, most online banking platforms offer alerts for fraud or suspicious activity. These alerts can be sent to your phone or email and can help you catch any unauthorized activity on your account quickly.

Pros and cons of online bill pay

Before enrolling in online bill pay, it’s important to understand the pros and cons of this payment method.


  • Online bill pay is less expensive — Compared to other payment methods, such as sending a check through the mail or using a money order, paying your bills electronically is cheaper since you don’t have to pay added fees or postage.
  • It’s quick — With online bill pay, there’s no need to spend time in the car driving to drop off a check. You can do everything from home at any time of day or night.
  • Online bill pay is more secure — With banks instituting safety measures like multifactor authentication, online bill pay can be safer than paying bills with a check.
  • Minimizes the risk of late payments — When you mail your payment, you hope your check makes it to the payee on time. If a check is delayed or lost in the mail, you could incur late fees. With online payments, you can schedule payments in advance or even sign up for automatic payments to avoid missing the due date.


  • Automatic payments may overdraw your account — Signing up for automatic payments can be a great way to stay on top of your bills, but you do have to monitor your account and ensure you have enough cash available. Otherwise, automatic payments can be withdrawn from your account when you don’t have enough money, and the bank may charge you overdraft fees.
  • Payments can take several days to process — While you can pay your bills online in just a few minutes, your payment isn’t processed right away. It can take a few days before the payment goes through, so if you make a payment on the day the bill is due, it may not be processed until after the due date, and you could face late fees.
  • You must turn off bill pay if you cancel a service — If you decide to cancel a subscription or service, make sure you turn off your automatic payments from your bank account. Otherwise, the bank will continue to pay the designated amount every month.

What’s next?

Online bill pay is a safe and convenient way to pay your bills. However, be sure to monitor your account for overdrafts and make sure you cancel automatic payments if you decide to discontinue a subscription or service.

If you’re interested in trying online bill pay, contact your bank or financial institution to see if it offers this service. Once you’re set up, you can start paying your bills with just a few clicks.

About the author: Kat Tretina is a personal finance writer with a master’s degree in communication studies from West Chester University of Pennsylvania. Obsessed with her many side hustles, she focuses on helping people pay down their … Read more.