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Online Bill Pay - Learn how online bill pay works

The majority of major banks and financial institutions in the United States today offer online bill pay services to their customers. Most banks choose to out-source their online bill pay applications to 3rd party providers. The largest providers of online bill pay services to financial institutions are Fiserv and Metavante

Visit our online bill payment provider review pages to read reviews of various online bill payment sites and to understand the various options available to you to pay major billers like American Express, Comcast, AT&T, and Sears

These 3rd party providers establish and maintain electronic connections to the major billers in the country, and utilize the ACH system to deliver the payer’s money to the recipient biller.

While many billers will accept credit cards for bill payments on their own web sites (these are called biller direct web sites) these same billers are less likely to accept credit cards when bills are paid through banking web sites. This is primarily due to the fact that ACH payments are very inexpensive to the biller, whereas credit card payments can be comparatively quite expensive due to the associated interchange costs that cards carry.

In addition to being able to pay bills at banking web sites, many banks have also enabled the capability for the consumer to receive an electronic version of their bill as well. These electronic bills are called e-bills.

If the 3rd party provider does not have an electronic connection to the biller that a consumer is trying to pay, the provider will print and mail a check to the biller on the consumers’ behalf. Currently, the major online bill pay providers deliver about 80% of their bill payments electronically via the ACH system, and the remaining 20% are paid via paper check. The ability for a consumer to pay any bill that they need to pay, regardless of whether the provider has an electronic connection to the biller or not, is called a “pay anyone” capability.

Here is how the typical online bill pay application works:

  • A consumer logs onto their bank’s online bill payment application.
  • If they are paying a bill for the first time, they need to go through a simple one-time setup process for the biller. This involves selecting a biller from a list of supported billers, or entering the biller information from their paper bill into a web form. The data required by the consumer to add a new biller will include the biller name, biller address and phone number, and the consumer’s account number with the biller. This biller setup is a one time process for the consumer. After a new biller has been established in the consumer profile, that biller will remain in their personal list of billers for ease of making future payments.
  • If the newly added biller has the ability to send e-bills, the consumer will be prompted with that information and can choose to accept or decline the offer to receive e-bills.
  • Once the consumer has setup the biller that they want to pay, they indicate the date that they want the payment sent to the biller, and the amount of the payment.
  • In addition to allowing the consumer to make single payments to billers, many online bill payment applications will also allow the consumer to setup recurring payments. If the consumer elects to setup recurring payments, the provider will automatically generate a payment every month to that biller on behalf of the consumer until the time that the consumer chooses to turn the recurring service off.
  • On or around the due date for the payment, an ACH debit is made against the consumer account to withdraw the specified funds, and a corresponding ACH credit (or paper check) is generated to deposit those funds to the recipient’s bank account. If the consumer does not have enough money in their account to cover the amount of the payment, the ACH debit to the consumer’s bank account will be rejected and the payment will not be made.
  • The online banking bill pay website maintains a historical view of transactions so that the consumer can have a record of the date and amount of previous payment transactions.