How We Pay 'Da Bills

In the U.S., how do you pay your bills? Any bills. Utilities, groceries, rent, etc. I'm sure you all have a checking account, but how much use is that checkbook really getting these days? Do you even remember where your checkbook is? Chances are for many of you the answer is "online payment" or perhaps "credit card".

Here in Japan there is no personal checking system, and having a credit card puts you in the "lifestyles of the rich and famous" category. My personal understanding of day to day Japanese personal accounting still has a lot of growing to do, but I'm going to try to give an introduction based on my experience thus far.

How Do I Pay For This?

Face-To-Face Transactions: Cash, cash, cash.

Even small business employees' paychecks are commonly delivered in cash. Very large organizations may have a direct deposit system, but in order to participate in this you must have a bank who has a contract with your direct deposite provider. Banks which don't qualify are more common than you think. If you're purchasing something in a large chain restaraunt or a major department store, you may be able to use your credit card. Ask before you pull it out. Cash is hugely popular because it's convenient, instant, and most of all, it doesn't incur a handling fee.

Utilities & Such: Automatic account withdrawl, convenience store, account transfer, and bank window.

Automatic account withdrawl is exactly what you think it is. Every month on a fixed date, the electrical company attempts to withdraw the amount you owe them from your account. If that day happens to fall on a Sunday or national holiday, they'll attempt on the following business day. If there's not enough money in your account, they'll try again every few days following until the withdrawl goes through. They'll keep attempting for months if need-be. This method is popular because the consumer pays no handling fees, and so long as enough money is in the account, doesn't have to think about it too much. Similar to direct deposit above, your bank must have a contract with the electrical company or they won't be able to make the withdrawl. Even if you think you are with a fairly large bank, you may be asked to wait up to 24 hours while they check to be sure they have a contract with your bank. You have to be on top of your account status with this method. If, for example, the electrical company has been stuck in a loop trying to make a withdrawl that you've forgotten about for weeks, and you deposit $500 to cover that $499 bill that you know is coming from your car insurance company, then the electrical company finds that money and finally takes the $200 you owe them, you've just missed your insurance payment without realizing it. This example probably wouldn't be too awful, but if it's your home loan you miss there could be trouble.

Convenience store payments are a bit of an adjustment for us foreigners. A computer-printed bill comes to you in the mail for your electricity bill. On it is the amount you owe and a barcode. Go in to damn-near any convenience store you like, they scan the bar code with a laser wand, you pay a $2 to $3 handling fee plus the bill amount. Done. These are extremely popular because you can pay at any time you are able up until the due date, you pay in cash, the handling fee is reasonable, and there's probably three to five convenience stores much closer than your bank, you can even pay past the due date if needed. These days some companies (such as NTT Docomo) hesitate to set people up on this payment system because too many take advantage of the fact that you can pay past the deadline.

Account transfer is another system we don't see a lot of in the U.S. Perhaps this is what's happening on the back end when you do an online payment, but (to put it in nerd terms) the user interface is exposed quite differently here in Japan. This is another very commonplace way to pay for things, and probably the hardest for a foreigner to learn. Convenience store payments require little to no language skill, doing an account transfer requires that you be able to read banking terms in kanji under the time pressure of a waiting ATM machine. For this system the electrical company has told you their bank name, branch name, branch ID number, account number, and account type. Let's assume this is our first time paying the electrical company by account transfer.

1. Touch "account transfer" on the ATM screen.
2. Put in your ATM card and pin number.
3. Search for the name of the bank to which you want to make the transfer.
4. Search for the name of the branch of the bank that is the home branch of the account to whcih you want to transfer.
5. Enter the account number to which you want to transfer.
6. Enter the account type to which you want to transfer.
7. Enter your name.
8. Enter your phone number.
9. Enter the amount you want to transfer.
10. Confirmation screen: bank/branch/account/account owner to which you are transfering.
11. Confirmation screen: your name/your phone number/ammount of transfer/handling fee
12. Yes, I'm sure I want to make this transfer.
13. Would you like to record this transfer to a mag-stripe card for future transfers? (Yes is a good idea.)
14. Take the mag-stripe card, transaction receipt, and your ATM card.

Done. Now that you have that specific transaction recorded to a card, next time you can replace steps three through eight with a single step: insert mag-stripe card. Handling fees on these are hard for me to swallow. They're calculated on a sliding scale depending on how much you send. The minimum fee is about $3.50 for any amount up to around $200. Then the fee slides up to about $10 at $1,000 and over. Transfers over $1,000 are uncommon, and require a special sign-up process with your bank to allow them from an ATM. If you don't do these very often, you probably fill out a transfer request slip and do it the old-fasioned way -- at the teller window.

Teller window payments are new even to me. Some kinds of bills (the only one I can think of for sure at the moment is water and sewage) are paid directly to the bank. Hand them your bill with money, and you are considered paid-in-full.

Online/Fax Purchasing: COD, account transfer, convenience store payment, credit card.

You may have guessed that if most people don't have credit cards, ordering something online (or more commonly by fax) is a bit different as well. COD has to be the most popular way to do this. Not all companies allow it, but most do. The handling fee will run you $6 to $10. It's considered the most secure way to pay because you can confirm the product is what you ordered before you hand your money to the delivery man. Yes, that $2,000 laptop you just ordered can even be paid for by COD.

Account transfer is another common way to pay for this. It's less secure though because you wire cash into the seller's account before they've even shipped the product. Recommended only for companies you trust. See the section above on this method for more details.

Convenience store payment was also discussed above, but in the case of an online purchase the company will usually let you print the barcode yourself. You can then walk across the street to Seven Eleven and pay for your purchase only seconds after completing the online order.

Of course online orders allow credit cards, but again you have to have one first.

Paying Vendors as a Small Business: all of the above, cash/check collection.

In a one month accounting cycle as a small business, you're likely to touch every one of the above methods of payment at least once. We also have established relationships with other small local businesses such as building repair, taxi service, etc. Among these companies, at least ten of them actually send someone over to collect either cash or a check directly from us. (This also surprised me a great deal. Doesn't it cost these companies a rediculous amount of labor to send two people around the region collecting money?)

"What? Checks? You said there were no checks!" Yah, no personal checks. There are business to business checks. They were uncommon a long time ago, and are even less so now. A few things about the checking system in Japan. 1) Your business must be very well established before a bank will allow you to have a checking account. Many businesses of ten years can't even get them. 2) Your account transaction book (remember those? haha) will only show you deposits made to the account. Never withdrawls. If you want to know how much remains in the account or who has deposited those checks you passed out last week, you have to call the bank. 3) You must use one of those giant steel wheel presses that both puts ink plus a physical impression in the paper to make a check. 4) Some people take a lot of pride in being able to cut checks. 5) Swallow your pride. This system is a royal pain in the arse. Just hand the bastards cash.

I hope you've enjoyed this tour-de-force of the day-to-day grind of paying bills in Japan. Perhaps one day someone who just moved to Japan will stumble on to this and find it actually useful.

[Edit: Forgot one more thing. ATM cards are never used to make payments in Japan.]