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Recent articles by Liz Pulliam Weston: • How to choose the right brokerage for you, 11/21/2004 • Secrets a background check won't uncover, 11/10/2004 • Hate haggling with auto salesmen? Dont, 11/7/2004 More... |
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Some banks and brokerages still gouge customers for online bill-paying, but savvier competitors have finally dropped the fees. Bottom line: You don't need to pay. By Liz Pulliam Weston Free online bill payment may finally be taking off. Its about darned time. Bank of America recently joined Citibank and Chase as big banks offering online payments gratis. And American Express offers online bill paying free with its American Express Bank, FSB accounts.
Yet most banks, brokerages and third-party vendors still insist on charging consumers $4 to $15 a month charge for a service that ultimately saves banks and billers money. And that makes me cranky. I, for one, refuse to pay a dime for this service, and apparently Im far from alone. Collective wisdom of the masses The masses have been telling us for years that they wont pay. Back in 2000, 59% of the consumers polled in one survey said they werent willing to pay any fee to use online bill payment. Then a measly 8.7% of U.S. households, or fewer than 10 million, paid even one bill online in 2001. Most of those who try it will tell you that paying bills online is a great convenience. You can do it from anywhere, not just your desk at home. Getting payments set up is relatively easy in most cases, as is making sure the money gets there on time -- sparing you from late fees and hassles. Many of the full-featured, pay anyone systems allow you to set up reminders to notify you when bills are due and to pay recurring bills automatically, so you dont even have to think about them. Some try to make the argument that consumers should be willing to pay for this convenience. But thats nonsense. For one thing, youre asking most people to try something new, never an easy task. And again -- its the businesses that are really saving money here. Sure, billers, banks and third-party bill-payment vendors face big start-up costs for offering electronic bill payment. But the Federal Reserve estimates it costs anywhere from $1 to $5 to process a paper check. Electronic payments can be processed for as little as 7 cents each. Using customers' money for free Banks currently have most of the online bill paying market, and these financial institutions often get another benefit -- free use of their customers money. Several readers that use their banks online bill-payment systems tell me the money disappears from their account several days before their bills are actually paid. While a bank wont profit much from the float on a single cell-phone bill, multiply that by 12 to 15 bills a month and several hundred thousand households a year and youre talking a pretty good chunk of free change. Youre also talking about customers who typically are more profitable than the check-and-stamp crowd. A survey by Gomez Inc. this summer found people who use their banks online bill-payment systems are more likely in the past year to have increased their account balances and decreased their visits to branches and calls to bank representatives. Bank of America says its online customers tend to have 35% higher balances -- and make 30% fewer calls to the bank -- than their offline counterparts. Charging your most loyal and profitable customers for behavior you want to encourage is dumb, and just another example of the way banks are trying to nickel-and-dime us to death. Lots of free ways to pay bills Advocates point out that the typical household can save $4.44 to $5.55 a month in stamps using online bill payment. That ignores the fact that there are plenty of free ways to pay your bills that dont involve checks or stamps. Many of the people who have tried online bill payment so far, for example, havent signed up with pay anyone systems. Instead, theyve gone straight to their credit-card companies Web sites and paid the bill there. You can also set up automatic payments that dont require a computer at all. At our house, the mortgage, utilities and phone bills are automatically deducted from our checking account by the billers each month. The only thing I have to remember is to keep enough money in the checking account to cover the bills -- something Id have to do anyway, even if I were paying by check. A few other bills, such as our cell phones and health-club dues, are charged to credit cards that we pay off in full every month. Again, no cost to us. The credit cards themselves allow us to set up recurring payments that deduct at least the minimum balance from our checking account each month, just in case I forget to make the trip to their Web sites before the due date. The times Ive used other online bill-payment systems -- taking advantage of those try it for three months for free offers -- Ive been happy with the results. Its certainly more convenient to have all your bills in one place. Most of all, I like the security and the certainty of online bill payment. That may surprise consumers who have never used it, since those who still pay by check often say theyre concerned about security or glitches that could prevent their bills from being paid. But Ive found online bill payment to be more secure and less glitch-prone than the U.S. mail. No longer do I have checks sitting in my mailbox for anyone to steal -- nor do I face the alternative of having to run to a post office every time I want to mail a check. The one time an electronic payment didnt make it to its destination on time, the error was quickly fixed and my late fee was waived. Back when I was entrusting payments to the Postal Service, billers were a lot less sympathetic when a due date was missed. Oh, sure, the check is in the mail. So if you havent tried online bill payment yet, give the free services a shot. And if youre one of those bankers who is still charging customers for bill payment, get with the program. Free the people -- and the profits will come. Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board. | |||||||||||||||
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MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.