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A Newcomer’s Guide to Managing Money

Ways to pay your bills

When you move to a new place, 

it doesn’t take long for bills to 

start coming.

You may pay some bills like rent, utilities, and 

other payments each month. You may also have 

one-time bills, like a security deposit when you 

rent an apartment.

In many cases, you will have one or more options 

you can choose from to make these payments. 

The list below helps you understand different bill 

payment options and their potential advantages 

and disadvantages. Knowing how they work could 

help you avoid some fees, including fees from late 

or missed payments.

Check

Definition Benefits Risks

Checks are forms that you fill 

out to pay for something from 

a checking account.

You write the amount and 

the name of the person 

or company that you wish 

to pay on the check. The 

amount comes out of your 

bank checking account when 

the person or company who 

receives the check deposits 

it or cashes it. You can also 

get a similar account from a 

credit union.

§ Convenient once you apply for 

and the account is set up at a bank 

or credit union.

§ Can be mailed.

§ Easy to prove payment if there is 

a dispute.

§ Funds are held in the checking 

account until you write out the check 

and the check is deposited.

§ Unlike cash, if a check is lost or stolen 

or someone forges your signature, 

you have protection for the money 

in your account. But, it can be hard 

to stop a check if the person who 

receives it deposits it quickly. 

§ If you pay bills by check 

without enough money in your 

account, the bank or company 

you send the check to may 

charge you fees.

§ You have to remember to pay a 

bill using a check each time it is 

due (not automated).

§ Postage costs of mailing 

the payment.
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Automatic or direct debit

Definition Benefits Risks

You provide the merchant 

or service provider (for 

example, your cell phone 

provider or utility company) 

with your checking account 

information and they take 

the funds from your account 

each time the bill is due (for 

example, every month).

§ Convenient, saves time and free. 

§ You may pay a lower interest rate for 

loans if you make your payments via 

automatic debit.

§ Makes it easy to pay for bills that are 

frequent and consistent.

§ Reduces chance of being late—

once you set it up, it is automatic.

§ You have the right to end 

automatic payments.

§ Easier to prove payment should a 

dispute arise.

§ If the amount of the bill changes each 

month you may get a notice before 

the transfer is made to pay the bill.

§ If you pay bills by automatic 

debit without enough money 

in your account, the bank or 

company you are paying to 

may charge you fees.

Warning: When money is 

automatically taken from your 

account, you could accidentally 

spend more than you have. If 

you do not have enough money 

in your account to cover an 

automatic payment or other 

charges you’ve made, you may 

have to pay costly fees. To stop 

automatic withdrawals, contact 

both the merchant and your bank.

Online bill payment

Definition Benefits Risks

You give your bank the 

merchant or service 

provider’s information, 

and your bank makes the 

payment according to the 

amount and schedule you 

set up.

§ Convenient and saves time.

§ Makes it easy to pay for bills that are 

frequent and consistent.

§ You can choose between making 

one-time payments each billing cycle 

or setting up recurring (automatic) 

payments using your bank or credit 

union’s online web services.

§ Reduces chance of being late—

once you set it up, it is automatic.

§ Easier to prove payment should a 

dispute arise.

§ Easier to stop an unintended or 

erroneous payment.

§ Takes time to set up and learn.

§ If you pay bills by online bill 

payment without enough 

money in your account, the 

bank or service provider may 

charge you fees.

§ If you have set up recurring 

payments and the amount 

changes, you may pay the 

wrong amount. If you pay less 

than the full amount of the bill, 

you may have to pay fees.

WAYS TO PAY YOUR BILLS
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Money order

Definition Benefits Risks

A money order can be used 

instead of a check. You can 

buy a money order to pay a 

business or other party.

§ Easy to understand.

§ Can be mailed.

§ No personal banking information 

appears on the money order.

§ May be inconvenient because you 

have to buy a money order.

§ Cost to buy money order and to mail 

the payment.

§ May be hard to prove payment 

unless you have the money order 

receipt and a receipt for payment.

§ Funds are difficult or impossible to 

recover if lost or stolen.

§ You have to remember to pay the bill 

each time it’s due (not automated).

Credit card

Definition Benefits Risks

A credit card allows you 

to borrow money up to an 

approved credit limit. You 

will pay interest if you carry 

a balance, and you can be 

charged other fees based 

on the terms of the contract. 

You can expect to make a 

minimum monthly payment 

and you may want to pay 

more than the minimum to 

pay it off sooner. 

§ Can use a credit card to pay bills 

over the phone or online.

§ Easy to prove payment should a 

dispute arise.

§ Protects you from having to pay for 

some or all the charges if your card 

or information is stolen or lost and 

you report the theft.

§ Can be set up to automatically pay 

recurring bills.

§ Can help build your credit history 

if you make payments on time and 

don’t get close to your credit limit.

§ Costs more than paying for the 

purchase with cash or a check if you 

can’t pay the credit card balance 

in full every month. If you carry a 

balance, you have to pay interest on 

the balance.

§ Creates another bill you have to pay.

§ Creates debt—you are 

borrowing money to pay for bills 

and other items.

WAYS TO PAY YOUR BILLS
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Tips

1. Make a list of your bills and their due 

dates, and put them on a calendar so you 

can easily see when payments are due.

2. Some creditors let you pick the day of the 

month that you bill is due. 

3. However you choose to pay your bills, 

keep track of your money coming in and 

going out. It will help you avoid fees.

Cash

Definition Benefits Risks

Cash is money that you have 

in hand.

§ Often no fees associated with 

paying cash directly to the 

company if paying the full 

amount owed. Buying or using 

a special product such as a 

money order or prepaid cards 

may cost money.

§ When you use cash, you’re not 

incurring debt.

§ No risk of overdrawing 

your account.

§ Not all bill payments can be made 

in cash.

§ Can be inconvenient and costly to 

travel to the company to pay the 

bill in person. 

§ May be hard to prove payment 

unless you have a receipt.

§ Cash is difficult or impossible to 

recover if lost, stolen or destroyed.

§ You have to remember to pay 

the bill each time it’s due 

(not automated).

Contact us

 Online

consumerfinance.gov/askcfpb

 By phone

Toll free: (855) 411-CFPB (2372) 

TTY/TDD: (855) 729-CFPB (2372)

 By mail

Consumer Financial Protection Bureau

P.O. Box 4503

Iowa City, Iowa 52244

 Submit a complaint

consumerfinance.gov/complaint