Does It Pay to Pay Bills Online?

An estimated 35 million Americans now pay bills online and that number is growing. But before you switch on your computer, you should know both the advantages and disadvantages of online bill payment.

While millions of Americans already pay their bills online, the number is expected to continue to increase, according to Gartner, Inc., a provider of research and analysis on the global IT industry. In fact, it is estimated that within three years, more than 65 million Americans will view their monthly bills online.

If you are not currently paying your bills online, now may be the time to log on and start clicking. According to a report from Wells Fargo, if everyone in the United States paid their bills online, 18.5 million trees a year would be spared — enough to build 216,000 single-family homes.

How it Helps

The typical consumer pays between 8 to 15 bills every month. Converting your paper to online payments is a sure way to prevent losing a bill or even forgetting to pay.

In fact, many third parties and banks offer a bill reminder feature which automatically sends you an e-mail notifying you of outstanding balance or an upcoming bill due date. Furthermore, most guarantee the receipt of payment and will pay the merchant any late fees associated with a timing issue.

Additional benefits of online bill payment include selecting your own bill payment dates; creating a log of your payments; making multiple payments at once, saving significant time; and assisting you as you organize your overall finances.

Your Choices

Pay through your bank. Many banks, including Bank of America and Citibank, now offer customers online bill payment services with no fees attached. Generally, a customer who signs up for online bill payment either has their bills automatically debited from their account or manually pays their bills online each month.

Today, 18.8 million customers use online payment options through their bank, according to Gartner. This is good news for banks, as customers who use their banks to pay their bills online usually stay with their banks longer and have higher balances. For example, Bank of America customers who bank online tend to have 38 percent more money in their accounts and have 45 percent higher loan balances than customers who do not bank online.

One-third of the nation's banks and brokerage firms offer free online bill payments, according to TowerGroup. The growth in this area is attributed to both consumers demanding online access and companies increasingly encouraging their customers to trade in the envelope and stamp for a connection to the Internet.

Many banks which previously charged a monthly fee of $5 to $10 now offer free online bill payment services. If your bank does not, contact them to discuss lowering or eliminating the fee. If they are unwilling to negotiate, consider switching your accounts to an institution which does not charge any fees.

Pay the company directly. Many utility, electric, phone, mortgage and cable companies now allow you to pay them directly via the Internet by credit card or automatic debit from your bank account. Currently, 75 percent of all online payments are made directly with the biller, according to Jupiter Research.

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