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.
- 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.
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.
4. Travel — ticketing charges. These days, the airline industry is ruthless about cutting costs and squeezing every last dime out of their customers. Airlines don’t like paying for hundreds of customer service representatives to help you make travel arrangements, and prefer online bookings. So if you plan on using an agent to book your next flight, be prepared to pay for the privilege. Delta Air Lines levies a “direct ticketing charge” of $20 for every ticket booked over the phone with the help of a Delta representative. And they’re not alone — United Airlines, US Airways and Continental Airlines also charge between $20 and $25 for a telephone booking.
Even Southwest Airlines — often celebrated for its customer-friendly service — plays a perky recording saying “lower fares may be found on Southwest.com” when you dial the company’s reservations number.
While rental car companies rarely charge a specific fee for phone or in-person sales, they typically offer deals online that aren’t promoted or even offered in their stores.
“My personal experience is that you get more online. One time I dropped by a major car rental company in Tulum, Mexico. They quoted me one price. I went next door to an Internet cafe and booked it for half-price,” says Robert Reid, U.S. travel editor for Lonely Planet, a best-selling publisher of travel guides.
5. Shopping — missed deals. Forrester Research predicts that online retail sales will reach $229 billion by 2013. Why are shoppers flocking online?
“Prices online are generally lower than prices in the stores. And often, you don’t have to pay sales tax,” says Linda Criddle, president of LookBothWays Inc. — which promotes online safety education for consumers — and co-author of “Using the Internet Safely for Seniors for Dummies.”
Those who avoid shopping online miss out on some great deals, says Steve Baker, vice president of industry analysis at NPD Group.
“Clearly, right now, online retailers can sell for less because they have some cost advantages in terms of overhead,” Baker says. While he expects that gap to narrow, Baker says restricting your shopping to brick-and-mortar stores will cost you in the long run.
“Retailers are going to have deals online that aren’t available in the stores; they’re going to have deals in the stores that aren’t available online,” Baker says. “If you’re looking for the right product at the right price, you can’t restrict yourself to one channel.”
Just as with brick-and-mortar stores, the more you shop around, the more likely you are to get the best price.
Instead of pricing an item at two stores that sell electronics in your area, the Internet allows you to price it at 200 stores all over the country.
“One of the big advantages of shopping online is being able to comparison shop very easily,” Wasow says.
So how can consumers get the benefits of transacting online and minimize the risk? Criddle offers the following suggestions:
- Use credit cards, not debit cards, to buy online. Credit card companies offer better consumer protections in the event a fraudulent purchase is made from an account.
- Use anti-virus and anti-spyware software. It’s important to keep this software up to date.
- Update your operating system. Whether it’s Microsoft’s Windows, an Apple operating system, such as OS X, or something else, it needs to be updated frequently so flaws can be fixed, which helps keep you safe.
- Be careful with browser settings. Mainstream browsers like Mozilla’s Firefox and Microsoft’s Internet Explorer come prepackaged with fairly strong security settings. Criddle suggests keeping these default settings.
- Install software that checks out sites when you search. Criddle tells consumers to install an add-on for their browser that tells them whether a site is safe. She recommends Web of Trust or McAfee SiteAdvisor, both of which have free versions.
- Turn on your operating system’s firewall. Most operating systems now have a built-in firewall to keep unwanted visitors from accessing your computer.
- If you have a wireless router, make sure it is password-protected. Thieves can access your home network through an unprotected router.
- Learn to spot a scam. Look for bad grammar, strange e-mail addresses and names in the “To:” and “From:” lines of an e-mail. Avoid disclosing sensitive information in response to any e-mail.
- Create secure passwords. Never use real words. Instead, substitute numbers for letters and words — 2 for “to” or 1 for “L” — to create easy-to-remember but hard-to-crack passwords. “Passwords don’t have to be hard to remember,” Criddle says. “They just have to be hard to guess.”
- Be coy with your password hints. Many sites ask you to provide the answer to a question in order to prove your identity. Criddle suggests making up an answer that you’ll remember but a thief wouldn’t know. “If they ask, ‘What is your mother’s maiden name?’ ‘Purple butterfly,'” she says.