Banks would like you to pay your bills electronically, and they’re making it easy and profitable for you to do so.
And while change comes slowly when it involves our money, millions of Americans have decided that the advantages of e-payments are worth it. What began as a sluggish stream of people viewing and paying bills online is turning into a raging torrent.
The research firm TowerGroup says there were 1 billion online bill payment transactions in 2005 in the United States; it estimates that the number will rise to nearly 4 billion by 2012.
For consumers, online payments save money—44 cents in postage for each check mailed, plus the cost of buying checks—and the time it takes to write and mail checks. Environmental savings can also be considerable, especially if people stop receiving paper bills and bank statements as well.
Most banking institutions now offer Internet banking and online bill paying services. “Online bill-paying is secure,” says Nicole Sturgill, research director at TowerGroup. “Financial institution sites contain more authentication mechanisms than most online shopping sites.”
Yet cyber scammers do manage to victimize some people who bank and pay bills online, breaking into their accounts and transferring funds without authorization. Anyone who puts their money online needs to take steps to avoid this very real danger.
The Federal Deposit Insurance Corporation offers a few tips:
- Change your passwords frequently. If you make them a combination of letters, numbers and symbols, they’ll be hard to crack.
- Don’t do your banking or bill paying on a computer used by the public, such as one in a library.
- Don’t click on links found in unsolicited e-mail and strange websites—doing so can infect your computer with malware that reports your keystrokes back to hackers.
- Make sure that any online bank you deal with is legitimate and that your deposits are insured.
- Frequently check your online accounts to watch for unauthorized transfers.
You can find more details on security in this article in FDIC Consumer News.
Finding convenience and security
Is it time for you to join up? There’s no shortage of people who say it’s the way to go.
“I’ve never had an issue with paying bills online in the years since I signed up,” says Gerard Corbett of San Bruno, Calif. “It saves time and money because you can avoid late charges and going to the post office.”
Erin Mitchell of St. Petersburg, Fla., says she and her husband hesitated over the new technology. “It wasn’t until one of our checks went missing in the mail, causing us a lot of grief, that we decided to try online bill paying. Now we love it,” she says.
There are some complaints, even from users who are satisfied overall. “It does take four days or so for the bank to generate a paper check if the vendor doesn’t accept electronic payments,” says communications consultant Katherine R. Hutt of Washington, D.C. “So you have to be a little bit organized. I do still have an old-fashioned checkbook for those times when you absolutely have to write a check on the spot."
Still, some people remain unconvinced. “I guess I just feel safer with my collection of canceled checks to prove I paid my bill,” says Daniel Buckley of Abington, Pa. “I have trouble getting used to the idea of someone else paying my bills.”
Fear of hackers keeps other people away.
If you’re unsure about the idea, consider signing up with one creditor, pay one bill, and see how it works.
There are three basic types of systems:
1. A single website set up by a financial institution or third-party service. Most large banks offer their customers free bill-paying because it cuts the bank’s cost of doing business and attracts customers. There’s also a free private service, MyCheckFree.com. Other third-party services, such as Intuit’s PayTrust.com and FiServ.com’s MyMoney, which runs on the Facebook platform, charge a monthly fee.
While some banks and private service providers limit payees to big businesses like credit card issuers, department stores and utilities, others let you pay virtually anyone with a U.S. mailing address.
On the payment site, you create a list of payees that you can update at any time. To pay a bill, you click on the payee, enter the amount and the date, and verify that transaction details are correct with a final click.
Keep in mind that your payment may not be dispatched instantly through cyberspace. If your bill-paying service and your creditor have not agreed to allow electronic fund transfers, your service may need to create and mail a paper check. In those cases, you must allow up to a week for the Postal Service to deliver your payment.
2. Individual creditors with bill payment websites. Sign up with a creditor—say, your electric power company—and you’ll receive an ID and password giving you online access to your account details. You enter a payment amount, and the system electronically deducts the amount from the bank account you have specified.
Remember to enter the transaction in your check register just as if you had written a check.
While the need to log on to each creditor’s site is considered a nuisance by some, the convenience of having a payment credited immediately, or at least within one day, is an important advantage to others.
3. Individual creditors with automatic payments. You can authorize many creditors to deduct payments automatically from your bank account with no action on your part. This is arguably the most convenient form of electronic bill paying because you don’t have to own a computer to participate.
You receive your bills in the mail as before, but you don’t have to do anything except enter the deduction in your check register on the payment date. You’ll get the bill two to three weeks before the due date, in case you have questions about it.
If the current trend is a reliable indicator, taking pen in hand to pay your bills seems destined to become as archaic as carbon paper and typewriters.
William J. Lynott is an author and freelance writer who specializes in business and financial issues.