Does It Pay to Pay Bills Online?

Companies can cut their cost by a reported 80 percent when a consumer goes online instead of to a mailbox. According to the Federal Reserve, it can cost a biller as much as $5 to process a paper check whereas electronic payments can be processed for just 7 cents. Use an online bill payment intermediary. Companies such as Paytrust act as an intermediary between you and the company or individual to which you owe money.

With this type of service, you simply change your billing address from your home address to the online company which will receive your bills. Instead of paying your bills directly to the billing entity, the amount is debited from your bank account and electronically submitted.

In cases where the entity does not accept online payment, the intermediary will cut a check and mail a paper copy.

While convenient, these services do come at a cost. Paytrust, for example, costs $4.95/month plus $0.50 per transaction or $12.95 a month with 30 free transactions ($0.50 for each additional). Paytrust pays the billers from an operating center where they run a program which estimates the window of time anticipated when a bill will be received and when it is due.

According to Paytrust, the company will take responsibility for any late fees or credit issues due to any system errors on their end.

Pay through a Web portal. Web sites, including Yahoo!, MSN, Quicken and AOL, act as a Web portal for online bill payment to several hundred entities. Many of these sites offer free online bill paying for the first 100 billers (merchants/service providers).

Beyond 100, there is often a monthly fee as well as a per transaction fee. For example, Quicken partners with 250 different entities for its online Bill Pay service and charges consumers $9.95 a month for up to 20 payments, with a $0.50 per transaction cost for each additional payment. Many of these Web portals used to cut a paper check to pay your bills, requiring you to request payment in advance. But most now make electronic payments decreasing the time significantly — from five days to same-day processing.

This past March, America Online entered the bill payment game with its own online bill payment service, AOL Bill Pay. With more than 2,500 firms participating, AOL subscribers can pay many of their bills online and can even opt to consolidate their bills into one monthly e-mail.

In addition, AOL Bill Pay offers a simple way to organize all outstanding bills and enables you to send yourself reminders about due dates via cell phone, e-mail or instant message. This service also allows you to monitor your credit card spending by notifying you if you have exceeded a preset spending limit. AOL does not act as a payment intermediary, but instead provides users with direct links to merchant Web sites.

Security Issues

According to a study by Javelin Strategy & Research, online bill payers are 10 percent less likely to have their identities stolen versus those who use the standard brick and mortar payment because it is easier for thieves to view your paper invoices.

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