smart spending

5 ways fear of the Web costs you

Highlights
  • Shoppers who don't use the Internet may end up paying higher fees.
  • In many cases, the best deals can be found only online.
  • Nervous consumers can take steps to reduce their Web-related risks.

In 2009, making financial transactions online isn't just mainstream -- it's quickly becoming the norm.

A July 2009 study by Fiserv found that 69.7 million households now use online banking services, and 64.4 million households pay at least one bill online.

Numbers on that scale mean cost-cutting banks and other businesses increasingly are focused on taking their services online, and consumers who can't -- or won't -- do business online may end up paying high fees and missing out on great deals.

The following are five ways that fear of the Web may be stealing money from your wallet.

Price of financial technophobia
  • Banking -- higher fees.
  • Paying bills -- unnecessary costs.
  • Stock trades -- excessive commissions.
  • Travel -- ticketing charges.
  • Shopping -- missed deals.
1. Banking -- higher fees. Banks have been trying to shift transactions online since the Internet came into its own. Why?

"(Online banking) is a cheaper channel to service customers," says Emmett Higdon, a senior analyst for Forrester Research.

Higdon cites the example of Bank of America, which recently announced it would close up to 10 percent of its branches because so much of its customer traffic has moved online.

In past years, some financial institutions -- like Bank One (now part of JPMorgan Chase) -- even tried charging a fee of $3 on some accounts for the privilege of visiting a teller. Needless to say, the fees were unpopular.

"We learned this lesson the hard way a few years ago," says Higdon. "A lot of people voted with their feet on that particular measure, and we learned very quickly that customers will not be forced into using a particular channel."

Today, banks are less likely to browbeat customers into going online. Instead, they offer perks to savers as a way of enticing them to take the online leap.

For example, Higdon says customers who check their fee schedules may notice that some online transactions -- such as transferring funds to another account or sending money overseas -- are much cheaper than the same services performed at a brick-and-mortar branch.

Technology analyst and BlackPlanet.com co-founder, Omar Wasow, agrees banks generally have moved away from the online-banking hard sell and now are trying to woo customers with perks.

"If you're trying to open up a certificate of deposit, for example, you're able to get better rates online. Right now, it's more carrots than sticks," he says.

Meanwhile, customers who still insist on receiving paper correspondence may pay a price. Many banks are now charging customers extra to mail hard copies of canceled checks, a service the banks used to routinely perform for free, Higdon says.

Banking Luddites also may miss out on one small bonus: Some banks now offer a statement credit of a few dollars when you stop the stream of paper statements coming to your home.

2. Paying bills -- unnecessary costs. Failing to pay bills online costs you in some obvious ways. You have to spend 44 cents on a stamp for each bill you mail, and you have to reorder checks from the bank more often.

Refusing to pay your bills online also leaves you more vulnerable to late fees. Even if you have a great mail carrier, eventually a bill payment may slip through the cracks and end up delayed or lost in the mail, resulting in late fees or worse. Online bill payments help you sidestep these issues entirely.

"(Paying your bills online) may not seem so significant, but if you're someone like me who isn't great about going to the post office or getting to mailboxes, it's enormously convenient to be able to pay my bills on time," Wasow says. "And that of course has other great advantages, which have to do with making sure your credit rating stays good."

Some banks offer reward points for using their online bill pay services, Higdon says. Depending on which bank you use, online bill pay could get you frequent flier miles, gift cards and other extras.

3. Stock trades -- excessive commissions. Intense competition in the world of online investing has driven commissions way down. However, investors who do business with brokers the old-fashioned way -- over the phone -- are still paying like it's 1979. For example, investing giant Charles Schwab charges $12.95 per online trade of up to 1,000 shares. In contrast, the same transaction costs $17.95 if it's done through an automated phone service or a whopping $37.95 if it's done with a real live broker over the phone.

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You'll find similar jumps in commissions for mutual fund, commodity and bond trading.

While $25 may not seem like a lot of money in a transaction involving hundreds or thousands of dollars, every dollar spent on commissions is a dollar that will never be invested. These fees can add up, especially if you trade actively.

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