3 ways to pay
your bills online By Peter
Davidson • Bankrate.com
If you're still paying bills the old-fashioned way
-- with checks, envelopes, postage stamps and a trip to the mailbox
-- you can save time and money making payments online. All you need
is access to the Internet.
Experts say millions of Americans are already doing
it, and in the years ahead, tens of millions will be doing it, too.
According to Bruce Cundiff, an analyst with JupiterResearch,
a Darien, Conn., firm that specializes in developing Internet marketing
strategies, 18.9 million households paid bills online in 2003, 12.2
million more than in 2002. That figure, he says, is projected to
soar to almost 61 million by 2008.
"Online bill payment is now a mainstream consumer
activity," says Mike Herd, spokesman for the National Clearing
House Association (NACHA), a banking industry association that is
hard at work promoting online bill payment. And they're having success.
"Online bill paying is growing by 30 percent a year, and 500
million bills were paid online last year alone," he says.
There are three ways to pay bills over the Internet:
- Online banking. Sign-up
for a bank's online bill-pay service and make all your payments
at a single Web site. Some banks offer the service for free if
you open a checking account, others if you maintain a minimum
balance. Otherwise, expect a monthly charge of $5 to $7.
- Third-party service.
Known as "bill aggregators," these services, such as
Mycheckfree.com and Paytrust.com, collect bills for you from your
participating creditors via e-mails. They then e-mail the bills
to you a few days before they are due, and you remit payments
through their Web sites. As its name implies, CheckFree is free
while Paytrust charges $4.95 to $12.95 a month.
- Biller Direct. You
make payments directly at each biller's Web site either with a
credit card or by giving your biller enough information about
your bank account to complete an electronic withdrawal directly
from your account.
Which way is best? It depends, but if consumer popularity
is the standard, then making payments directly to billers via credit
cards is king in the online world.
"People are more familiar with their use,"
says NACHA's Herd. "Billers were able to get a head start by
actively promoting their Web sites in their billing statements and
on their billing envelopes." He expects that could change as
more and more people become comfortable with paying bills over the
Internet.
But paying directly at a biller's Web site does have
its advantages. For one thing, most billers who accept payments
directly through credit cards will accept your payment free of charge.
More importantly, if you're paying close to or on
your due date, your payment usually is credited to your account
instantly, which will help you avoid late fees and let you keep
money in your account longer. And while banks and third-party portals
like to tout the ease of one-stop bill paying, instant crediting
is one feature they can't match, at least not yet.
For the most part, it takes them several few days
to process your payment and transmit it to your biller.
"The rule of thumb is to allow three to four
days from the time you initiate a payment until it's credited to
your account," says David Fontaine, director of corporate communications
for CheckFree, a leading provider of e-commerce services and products
to more than 1,400 banks and other financial institutions.
CheckFree also makes it possible for consumers to
receive and pay bills online through its subsidiary, Mycheckfree.com.
Linda Sherry of Consumer
Action, a San Francisco-based watchdog, warns against bill aggregators.
"They present too many additional opportunities
for someone to steal your identity and your money," she says.
That's because in order to use the service, you have
to provide a third party with access to your bank account. But CheckFree's
Fontaine says security shouldn't be a concern. "We use Secure
Socket Layer technology to transmit and receive your personal information,"
he says. "This technology encrypts -- or scrambles -- your
personal information so it is virtually impossible for anyone other
than CheckFree to read it."
In addition, he says, multiple layers of physical,
electronic and procedural safeguards are in place to help prevent
unauthorized access to consumers' personal information.
Nevertheless, Sherry isn't reassured by these claims
of security. Apparently, neither are consumers, which may explain
in part why they seem to be sticking with biller-direct bill paying
rather than opting for the one-stop convenience of online banking
or third-party Web sites.
But that may change in the years to come because banks
see online banking as an important value-added service to attract
and retain new customers while streamlining costly operations like
paper handling and teller interactions with customers. In addition,
many studies tell them that consumers who pay bills on the Internet
would prefer to be able to use a single Web site, and they are doing
all they can to win consumers over, closing the gap when it comes
to speedy crediting of online payments.
"That's absolutely critical," says CheckFree's
Fontaine. He says that one-half of online bill payments processed
through CheckFree are credited the same or the next day.
But until online banking can offer instant crediting
of all payments, experts believe the vast majority of consumers
will stick with paying bills directly at their billers' Web sites
rather than opting for the convenience of one-stop bill paying.
|
