by Bradley Streeter

Created on: July 24, 2008   Last Updated: August 11, 2008

Online banking is a cheap and convenient way to manage personal finances that is, with the right precautions, just as safe as conventional banking. Actually, online banking done right is safer than conventional banking, as it limits paper records your finances. Many banks and merchants now offer free online banking, bill-pay and automatic debit. Some even offer discounts or interest-rate reductions as a token of thanks for saving them printing and mailing expenses. Here are some pointers to avoiding the agonizing monthly ritual of writing and mailing multiple checks, while saving time and reducing the stamps, checks and envelopes you have to purchase.

First, a few terms to become familiar with. "Online banking" can mean a wide variety of electronic methods of managing finances. Although most banks offer free online banking, some only mean that they offer free online access. "Online access" allows you to check balances, inquire about specific transactions and transfer funds between accounts at that institution. While many banks offer online bill-pay as part of their free online services, this is not universal. "Online bill-pay" is a method by which your bank initiates regular transfers of funds to merchants and creditors. Finally, "automatic debit" is a method by which a merchant or creditor initiates regular withdrawals from your bank account.

1) Research:
Does your bank provide free online access and free online bill-pay? If the answer is "no", consider switching to one that does offer both. You should also pay attention to whether your bank limits the number of bill-pays that you can authorize.

Although not all merchants and creditors have the technology to accept bill-pay, many allow automatic debit. If your bank limits the number of bill-pays that you can use or a particular merchant cannot accept bill-pay, you should consider using automatic debit instead.

2) Develop a strategy:
Before activating bill-pays or automatic debits, create a monthly budget that factors in your income, pay dates and recurring bills. Allow a day between pay dates and automatic withdrawals (more if you don't have direct deposit), and write down when each deduction should come out of your account.

This budget can save you considerable time and heartache down the road, as you now know how much spending money you have at a given day in the month. Some people create two accounts, a "bill paying" account and a "spending" account. If you are worried you don't have the discipline to keep

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