How to Pay Your Bills Online

How to Pay Your Bills Online the Right Way

Being able to quickly, safely, conveniently, and accurately pay bills from home (or anywhere else you can access the Internet) is probably the single biggest advantage of having access to your bank account online.  And as far as that goes, I’m NOT a fan of “automatic draft,” but I AM a fan of “paying bills online,” or “online bill pay.”  I will now explain the difference between these two payment methods.

Automatic draft

With automatic draft you authorize a company to electronically withdraw money you owe them directly from your account.  Companies tout automatic draft as a consumer benefit because it’s convenient (you don’t have to write a check or take any other action) and cost-effective (you don’t have to pay for postage or worry about late fees).  While it’s true that automatic draft is both convenient and cost-effective, bear in mind that it’s the companies you deal with that control the amount and timing of the electronic transfer (which is why they love it so much).

So why am I not such a fan of automatic draft?  Note that it’s fine if everything goes exactly the way that it should – meaning that you’re charged correctly at the right time.  After all, if you owe someone $100 on the 1st of the month it’s actually nice if that happens without you having to think about it.  No, if you’ve got automatic draft and you get poor service and/or you’re incorrectly charged then suddenly you’ve got a different problem: the company already has your money, thus leaving you the burden of getting it back (which puts you at a disadvantage – you always want to be the one holding the money in a financial dispute if at all possible).

As an example, my  friend Alison once joined a health club that required payment through automatic draft as a condition of membership.  We agreed and everything went fine…until she decided to terminate her membership.  I remember balancing the bank statement sometime afterwards and seeing a charge from the gym.  Somewhat irritated I thought, “Surely that’s the last charge.  Didn’t Alison terminate her membership over a month ago?”  But the next month’s bank statement came and a monthly charge was still coming through!  We then realized this was never going to stop unless we took action.  It took several calls to the heath and their accounting office to get things straightened out, and we finally did get our money back, but it took a good deal of effort our part to make that happen.

So to summarize, one of the main drawbacks of automatic draft is that if there’s a problem then you have to make all of the effort to fix the company’s mistakes in order to get your money back.  I don’t like that.  Still, I’m not saying you should never consider using automatic draft.  For example, in some cases when paying back a loan you’ll be offered one interest rate, but if you agree to pay it back using automatic draft then you’ll be given a lower rate.  So the bottom line is that if a company you’re dealing with is willing to share some of the benefits they receive from getting paid by automatic draft then I believe it’s worth considering.  If they’re not – if all they want is an automatic way to take your money at the time of their choosing – then I think you should select the method of payment that’s best for you, and most often that will be to pay your bills online using your bank account (which is sometimes referred to as “online bill pay”).

Paying bills online (or online bill pay)

Like automatic draft, paying bills online using your bank’s website is convenient and cost effective.  In addition, it enables you to control how much money you pay, who you pay it to, and when they’ll be paid.  This is how it works.

  1. Log on to your bank account (for general information on how to do this if you don’t already have access to your bank account online click here).
  2. Go to the “Pay Bills Online” section (the name will vary by website).
  3. Enter who you want to pay (if the payee is not already in your bank’s records then you may have to input the information manually the first time you make a payment).
  4. Decide which account you want the money to come from (it could be from a checking or a savings account you have at the bank).
  5. Enter how much you want to pay them.
  6. Enter the date you want them to be paid.

After you’ve input this information then one of the following two things will happen.

  1. If the payee is set up for electronic payments at your bank then the money will be transferred from your account to the payee’s account on the date you selected.
  2. If your payee is not set up for electronic payments then on the date you selected your bank will automatically print a check and mail it to the payee.

Note that paying bills online is slightly more work than automatic draft because you do have to take some action: you have to log onto your account and follow the steps above.  However, it still saves you postage and the time it takes to write checks (just like automatic draft).  But even more than that, paying your bills online enables you to take control of your hard earned money by determining how much you will pay, whoyou pay it to and when they’ll be paid.

Bank Accounts - how to manage your money

6 Benefits of Managing Your Bank Accounts Online

By managing your banking needs online to the extent possible you can cut down on the number of inconvenient, time-consuming trips that you would otherwise have to make to the bank.  Following are some specific and useful things relating to your bank accounts that you can do online.

#1 – Check account balances

You can check the current balance of your checking and savings accounts online.  This is useful because it enables you to see whether certain charges (such as a recent purchase) have hit your account and whether or not the amounts are accurate.  It also enables you to see whether checks you’ve deposited have cleared.

In addition, if you have a credit card issued by the bank, you can also review your credit card activity online.[1]   Again, this is very useful because it enables you to verify if your credit card transactions have processed and whether or not they’re accurate.  It also gives you the ability to monitor your account as often as you like to ensure that no unauthorized charges have been made.

#2 – View check images

By accessing your account online you can view (and print) images of checks you’ve written.  This comes in very handy if you lose a check carbon and you can’t remember who the check was to or how much it was for.  To give you an example of something I’ve done many times, say that you’re organizing the check carbons for checks your recently written as part of updating your checking account balance.  You’ve got check carbons for checks 1001 through 1010, but the carbon for check 1008 is missing.  So what does that mean?  Did you void check 1008 or did you actually write it?  You can solve the mystery by accessing your account online and looking up check 1008.  If it hasn’t cleared after a period of time you most likely voided it, but if it did then you should be able to see it online, even to the point of being able to print out a copy for your records if necessary!

#3 – Pay bills online

The ability to pay your bills electronically is a HUGE benefit of doing your banking online.

#4 – Transfer money electronically

Another convenient feature of online banking is the ability to transfer money electronically between your financial accounts.  For example, you can transfer money between:

  • A checking account and a savings account at the same bank.
  • A checking account and a savings account at a different bank.[2]
  • A checking (or savings) account and an investment account with another financial institution (which gives you a convenient way both to invest and to draw funds from your investments as needed).

Transferring money from one account to another at the same bank or financial institution is generally very straightforward.  However, to link accounts at two different banks or financial institutions takes a little more work.  To do so, log onto your bank or financial institution’s website, go to the “Electronic Funds Transfer” section, (the name will vary by website) and follow the applicable instructions.[3]  Is the process of figuring out how to transfer money between your financial accounts a bit of a pain?  Sure, but you’ll reap the rewards of your time and effort for doing so many times over.  Here are some examples of how.

  • Each time you get paid you can transfer money to your savings account.  It can either be a fixed amount each paycheck, or you can vary it based on your goals and the amount of extra money that you have.  Likewise, if your checking account is getting low then you can bolster it by transferring money to it from your savings account.
  • If you’re in your working years, you can set up your primary checking account to safely, conveniently and consistently transfer money to your investment account to save for retirement or other long-term goals.
  • If you’re retired, you can transfer a set amount each month from your investment account to your checking account as a living allowance.  In addition, you can transfer additional money to your checking account for whatever purpose at any time (assuming you’ve saved and have the additional funds!).

Again, prior to online banking, doing any of the above transfers was a real pain.  It required you to go in person to your bank or financial institution or to do everything by mail.  But with the ability to do these kinds of transfers online, you can move your money to where it needs to be in a manner that’s quick, safe, time-efficient and easy to track.

#5 – Stop payment on a check

If necessary for whatever reason, you can put a “stop payment” on a check in order to void it before it’s deposited or cashed.  You used to have to make a trip to the bank in person to stop payment on a check, losing valuable time in the process (because for a stop payment to work it has to be done BEFORE a check clears!).  However, you now have the ability to stop payment on a check through online banking.

#6 – Communicate with your bank

Getting answers to short, specific questions used to require a time-consuming trip to the bank to talk to a service representative or to navigate through an impersonal (and often overly-complicated and unhelpful) phone menu.  Now many banks provide you with the ability to get answers to specific questions online from a service representative via email.  If you’re not able to successfully get answers in this way then, of course, you always have the option to go to your bank in person or call their customer service line.  But if you’re able to resolve your questions online then that’s so much more convenient!

Invest the time to learn how to access and effectively use your bank accounts online

Online banking is really about investing.  How is that?  Remember, effective investing means making a sacrifice now in order to reap far greater benefits in the future.  In this case, if you take the time to learn how to access and effectively use the online features of your bank accounts (which not only include the items above, but even more) then you will reap great dividends in the future in terms of saving time, stress and money (no more stamps for bills, for example!).

So, if you don’t already have an online account with your bank or financial institution, follow the instructions on their home page to set one up.  If you have any trouble doing so then find their phone number in the “Contact Information” section of their website and talk with someone with their technical services group.  If that doesn’t work then, in order to obtain all of the benefits of online account access, it’s well worth the effort to make a trip to the bank in person to get help directly from a service representative.


[1] If your card was issued by a financial institution other than your bank then you’ll have to log on to their website to view your credit card activity.

[2] Not all banks provide this service, but an example of one that does is ING Direct.

[3] If you don’t already have an online account with your bank or financial institution, follow the instructions on their home page to set one up.  If you have any trouble doing so then find their contact information on the website and consult with their technical services group.  If that doesn’t work then, in order to get online account access, it’s well worth the investment of time to make a trip in person to get help directly from a service representative.

Credit Card Statement Balance

Understanding Your Credit Card Statement Balance

Credit Card Statements are Logically Organized

Like a lot of financial paperwork credit card statements seem to come at you with a lot of information, but if you know how to read them then you’ll find that they have lots of useful information organized in a logical way.

Credit Card Statement Balance Summary

Your credit card statement will have a summary of your account’s activity for the past month.  Following is an example of how it’s organized along with an example of what each line item means.

Description

Amount

Explanation

Previous Balance (or Beginning Balance)

$1,880

This is the ending amount from your prior credit card statement that carries over to the current month.  In other words, it should be equal to the “New Balance” on your lastcredit card statement.[1]

Less: Payments and Credits

($225)

This is the amount you paid on your credit card the prior month.  It can also have miscellaneous credits such as refunds from store returns.

Add: Current Charges

$375

This is the total amount of your credit card purchases during the past month (which ties to the “Summary of Current Credit Card Charges” below).

Add: Finance Charges

$20

This is the current month’s interest that you owe on your outstanding credit card balance.

Add: Fees and Penalties

$10

This is where charges will show up for things such as annual fees, late payment fees, penalties for exceeding your credit limit, etc.  If you don’t understand why you were charged this amount then contact your credit card issuer.

Equals: New Balance (or Ending Balance)

$1,060

This is the sum of your outstanding balance from the previous month ($1,880), less payments you made ($225), plus interest and fees ($20 and $10), plus amounts charged for the month ($375).  The total ($1,060) represents the amount you would need to pay in the current month to settle your credit card balance in full (though you can pay less than that all the way down to the minimum payment which is described below).

Summary of Current Credit Card Charges

In addition to summarizing the activity in your account, your credit state statement will provides details for all of the charges that you made in the past month.  Examples of such charges are as follows.

Description

Amount

Explanation

Crash and Bash Auto

$245

This was a one-time charge to cover a car repair.

See-it-Again Movie Rentals

$20

This is a recurring monthly charge for a subscription-based movie rental service.

Forgotten Fine Dining

$55

You charged this amount at a restaurant, but you’d forgotten about it until you got your credit card statement.

Phantom Industries Nonrecurring Charge

$40

This is a charge that you don’t recognize.  You should search your records to determine what it is and, if you can’t figure it out, you should call the company (their number or website should be on the credit card statement).

Nasty Surprises Incorporated

$15

This is a charge from a company you recognize and have dealt with in the past, but for reasons you don’t understand they’ve charged you unexpectedly.  You should call the company to find out why.

Equals: Total Charges for the Month

$375

This is the sum of the above amounts, and it ties to the “Current Charges” line on the “Credit Card Statement Summary” above.

Rewards Summary

If you have a credit card where you accumulate points, flight miles, or other incentives then you should see a summary of your rewards activity on your statement organized something like this:

The minimum payment and the due date

Your credit card will always show you your minimum payment, or the lowest payment the credit card issuer will accept by the due date without penalizing you according to the terms of your credit agreement.  Depending on terms of your credit agreement you can expect your minimum payment to be between 1% and 4% of your current balance.  So based on the figures in the example above if your minimum payment percentage was 3% then you would have to pay at least $32 by the due date in order to avoid late payment penalties ($1,060 x 3% rounded up to the nearest dollar).  Again, you can always pay more than the minimum payment, but you have to pay at least that much.

3 Key Things to Look for When Examining Your Credit Card Statement

Now that you understand the fundamental of reading your credit card statement I want to reemphasize 3 points that I alluded to above.

  1. You should recognize all vendor charges – Nobody should charge your credit card unless you give them express permission to do so.  Thus if you see a charge from a company you don’t recognize, you should follow up to see if it’s legitimate.
  2. Vendor charges should be accurate – Once you’re sure that nobody unexpectedly charged your credit card, you should then make sure that you were billed the right amount for each transaction. If not then you should find the paperwork for the applicable charge(s) and contact the company directly to resolve the problem (their phone number and/or website should be on your credit card statement or the receipt from the transaction).
  3. Your credit card company’s charges should be correct – You should understand both the rationale and amount behind all credit card interest, fees and charges.  If you see anything that look unusual, inappropriate, inaccurate or excessive then don’t hesitate to contact your credit card issuer to get some answers.


[1]  To further illustrate, if $1,880 was the “New Balance” or “Ending Balance” on your November credit card statement it should also be the “Previous Balance” or “Beginning Balance” on your December credit card statement.

Using 401k For Down Payment On House

Using 401k For Down Payment – Is It Right For You?

After adding money to your 401k plan over several years, you may have built up a lot of money inside your 401k accounts. These accounts could be a desirable supply of funds for investing in a home. Nevertheless, there tend to be rules as well as restrictions upon withdrawals from the 401k accounts. Fortunately, there may be a way for you to make use of the money within your 401k plan. One great way is using 401k for down payment.

Some 401k programs allow participants to consider a loan from the funds inside the 401k. Usually, the 401k plan will limit the quantity of the loan to some certain percentage from the total balance. This implies that you cannot borrow all the money inside your plan, are just some of it. Nevertheless, this quantity may be significant enough to become useful for the long-term objectives.  Check out our 401k calculator to see the impact loans can have on future earnings.

Borrowing From 401k Plan

Using 401k For Down Payment Fidelity

Here’s a screenshot showing what loans you have available through your 401k plan if you’re using Fidelity.

When a person borrow money from the 401k plan, you borrow the cash from yourself. In additional words, the money is withdrawn out of your account as well as distributed for you.  That means there isn’t a credit check as well as your credit score doesn’t impact in your loan rate of interest.  This is because, there isn’t any risk in order to any lender.  You are repaying yourself. Actually, the curiosity you pay about the loan goes straight into your personal 401k accounts.  It does not go into any financial institution or loan provider.

Be Aware Of The Rules When Using 401k For Down Payment

However, it doesn’t mean you are able to control how so when you pay back the mortgage. The INTERNAL REVENUE SERVICE has requirements that must definitely be met concerning 401k financial loans. As this kind of, the plan may have a set rate of interest that you need to pay whenever you repay the actual loan. Additionally, you should make well-timed, regular obligations, just like every other loan. Usually, most 401k programs require that you simply make regular monthly obligations to be able to fulfill this particular requirement.

When using 401k for down payment you need to be aware of possible negative situations that may arise.  It is necessary that a person make your own 401k program loan obligations. While you will find no lenders involved, and therefore there isn’t any damage for your credit score or credit history, there could be substantial taxes repercussions with regard to failing to settle the mortgage as decided. Any mortgage principal that isn’t repaid is recognized as a distribution through the IRS. Which means that the entire amount associated with any delinquent loan stability is taxable because ordinary earnings. Even worse, if you’re under grow older 59 1/2, then your distribution is going to be considered an earlier distribution and could be susceptible to a 10 % tax fee.

“Using 401k For Down Payment Does Have Its Advantages!”

I would advice against using 401k for down payment, if you already have the cash sitting around.  Otherwise, the advantages of using 401k for down payment to purchase a house are extremely advantageous to many people. Nevertheless, it is essential to realize that though it is financing to yourself, it continues to be an actual loan, also it must end up being repaid. If you’re able to do do that, then borrowing using 401k for down payment can be a smart method to finance your house purchase.

Debt Relief vs Debt Settlement

Debt Relief vs Debt Settlement

Understanding Debt Relief vs Debt Settlement

Choosing between debt relief and debt settlement could be a little confusing if you do not supply the facts. You may realize you’ll need some form of tax assistance, however, you may not know how to obtain it. If you’re planning on each one of these programs, make sure you understand the benefits and drawbacks of each one.

Debt Relief Overview

Debt Relief vs Debt Settlement
The pros of the debt relief company include help organizing and paying down your existing debt. Once you contact a debt management company, they’ll help you contact creditors and are available to some form of agreement to cover less cash every month in your accounts. Although you will still need to pay all the money back, you may well be capable of negotiate more uncommon harassing phone calls and letters.

Debt management services work as a go-between along with you and your creditors. If you are uncomfortable conversing with people on the phone, this can be a great solution. As opposed to feeling intimidated by pushy and quite often obnoxious creditors, let a specialist speak to them. They will fully stand up to your rights as a consumer. The main negative to using a debt management services is that it make a difference your credit. Many lenders view the usage of these kind of companies in the negative manner. For this reason they could be less likely to lend money in the near future. Although, if your credit is in serious trouble, once you’ve gotten your debt in order, you can start to rebuild your credit and acquire back on your journey to financial independence.

Understanding Debt Relief vs Debt Settlement

Additionally, there are benefits and drawbacks to working with a debt settlement company. In case you are seriously in debt, like many Americans today, you will probably find a debt negotiation company more helpful. These professionals can assist you with credit card settlement or most other types of huge loans. Your debt settlement counselor works directly along with your creditors to barter a more manageable amount of money you need to repay. This really is sometimes done by heading out the delinquency fees or area of the interest. Most creditors are happy to find least a of area of the money they’re owed. This is especially valid with credit card settlement. A lot of the bad debts could be interest – therefore the company is not really loosing on much. Saving 40% to 60% is normal with most debt settlement companies.

Another positive part of debt negotiation is that it is pretty quick and the debt will probably be paid completely. For those who have trouble saving money for any settlement payment, the company may also be capable of assist you with that. As long as you’re behind on your own bills, you can use on of the companies to help negotiate a credit card settlement or any other loan payoffs quickly. If you are worried you will likely have to declare bankruptcy, debt consolidation is a superb alternative. An individual bankruptcy will stay in your credit file for quite some time. Tells creditors you might never pay back the money you borrowed. While using settlement option, future creditors will at least see that you made an effort to pay back the money. This should hopefully show that you’ve learned your lesson about borrowing more than you are able to repay.

Debt Relief vs Debt Settlement Closing Thoughts

Just as the debt management companies, your credit will be affected by using debt consolidation. Additionally you need to make sure you might be using a reputable company that has your own interest in your mind. When you’re debt free, be sure you hold the important information. This will help so you do not find yourself in financial trouble again, later on.

Harassing telephone calls can cause one to become depressed as well as less want to make payments on your overdue accounts. When you contact a debt negotiation company, they’ll take care of the telephone calls and you may acquire some solace and feel in control of your daily life again.