BPAY is a handy way to pay bills, but you should never assume that it is always free.

Sometimes it can burn a hole in your pocket depending on the number of bills you pay each month and how fees are structured on your transaction account or credit card.

The New Daily surveyed the fee schedules of 15 financial institutions and we discovered a jumble of pricing policies.

• Australia’s most predatory credit cards revealed
• ASIC flags more action on payday lenders
• Aussie John contests data grab claims

Most banks and credit unions accommodate a set number of free BPAY transactions each month, while others levy fees on all bill payments.

Some banks offer unlimited access to BPAY on certain accounts.

We commissioned online financial products comparison site, Mozo, to help pinpoint accounts that allow consumers to use BPAY at the lowest cost.

Our main finding was that that there is no uniform price or fee for BPAY transactions. And there are a number of traps for unsuspecting users of the system.

Avoid using credit cards

Paying bills with a credit card might seem convenient but it can be messy and expensive if you try to do it through BPAY.

Some billers, such as Telstra, do not accept credit card payments made through BPAY because they might incur higher fees and charges from banks for the privilege.

GEM Visa charges you $2 each time you pay a bill in person at Australia Post.

If a customer tries to make a credit card payment to a biller who doesn’t accept credit card payments via the BPAY system, many banks and lenders will convert the transaction request to a cash advance.

While the bill will be paid, the credit card holder will attract an additional fee for the cash advance (usually $3 to $4 at the big banks) and incur penalty interest on the value of the bill payment.

You can get stung paying bills with some types of credit cards using payments networks other than BPAY.

You’re really dicing with trouble if you use the GEM Visa card issued by GE Capital Finance to pay bills. (TND readers might recall our review of this card on February 11.)

The GEM Visa card levies a $2 “handling fee” each time cardholders pay a bill in person at an Australia Post outlet.

The way around such fees is to only use your credit card for direct payments to billers.

You can do this by establishing a direct transfer arrangement on your credit card with recurrent billers.

Transaction accounts that charge for using BPAY

BPAY was originally designed for paying bills using transaction accounts, but that doesn’t mean all bill payments are free using these accounts.

Here’s an incomplete list of transaction accounts that charge fees on all BPAY payments:

– Australian Defence Credit Union Access Savings Account: $0.60

– Bankwest – Internet Banking Accounts – $0.20

– B&E Building Society – Everyday Advantage: $0.25

– Bendigo Bank – Ultimate Everyday: $0.40

– Defence Bank – National Access: $0.50

– Defence Bank – Salary Saver: $0.50

– Queensland Country CU – All Access: $0.25

Most everyday transaction accounts offered by banks do not levy fees on BPAY transactions, but some will slug you if you exceed monthly activity limits.

While BPAY payments may not always attract a specific fee from these providers, they often count as transactions for determining whether a bank imposes a monthly service fee on your account.

Westpac-owned Bank of Melbourne is one of a number of banks that charges a monthly service fee if you exceed a certain limit. Photo: AAP

Here’s an incomplete list of institutions that charge fees if you exceed a maximum number of electronic banking transactions, including BPAY payments, each month:

– Bank of Melbourne – Monthly Service Fee

– Bank of Queensland – Choice & Ultimate Accounts – 10 free internet transactions then $0.30 per BPAY transaction

– Suncorp – Ready Access and other accounts: $0.30

Here’s an incomplete list of transaction accounts that provide free and unlimited access to the BPAY network:

– ANZ Bank – All Everyday accounts

– Commonwealth Bank – all Netbank accounts

– ME Bank – Everyday Transaction account

– People’s Choice CU – Everyday account

Fees for incorrect bill payments

Every week thousands of Australians send cash via BPAY to the wrong biller or with an incorrect customer reference number.

Such transactions need to be recalled by your bank and another transaction initiated to settle the bill.

If you’re paying bills by telephone, make sure you hit all the right digits on your keypad before confirming the payment.

Billers such as AGL issue bills with customer reference numbers that run to as many as 18 digits.

If you get one of those digits wrong, it is going to cost you as much as $35 to recall the funds.

Banks call this a trace fee and there is great variation in how much they charge:

– Bankwest – $35

– Bank of Melbourne – $16

– Bendigo – $20

– Bank of Queensland – $15

– People’s Choice CU – $30

– Suncorp – $30

Cash management accounts and BPAY don’t seem to mix

Avoid using cash management accounts to pay bills. Photo: Shutterstock

Avoid using cash management accounts to pay bills.

If you have a cash management account issued by HSBC or Citibank you are in line to cop a fee of $2 on each bill you pay.

HSBC allows only three free electronic transactions, including BPAY payments on its cash management account each month.

When you exceed this paltry limit the $2 fee kicks in on every BPAY payment.

Tips for using BPAY

Using BPAY is convenient, but it can be a minefield.

– If you use the telephone for bill payments consider using BPAY through an internet banking account to avoid making misdirected payments that attract trace fees

– If you need to stick to telephone banking take great care plugging in the digits on Biller Codes and Customer Reference numbers.

– Always review your entries for biller codes and customer reference numbers using your bank’s automated voice recognition service.

– If you pay lots of bills each month consider switching to a bank provider that offers unlimited access to the BPAY network.