Chapter 4 MONEY IN ACTION ONLINE BILL PAYMENT: HOW AND WHY? Do you hate writing checks? Online bill payment may be the solution. If you want to receive bills by mail, then you can either pay bills directly at the biller’s Web site or authorize a third-party consolidator to pay your bills. The drawback of paying at each biller’s Web site is keeping track of the sites and corresponding user names and passwords. Third party consolidators may include your bank or a financial Web site such as bills.com (http://www.bills.com). A third option eliminates all paperwork involved in bill payment. Electronic bill presentment and payment (EBPP) is offered by companies such as Paytrust (http://www .paytrust.com) or CheckFree (http:// www.mycheckfree.com). These companies receive your bills and send you e-mail notification that a bill has arrived. You then go to the Web site to review the bill and arrange payment. EBPP services will also confirm that the payment has been made, remind you that an unpaid bill is due, and let you view and print a report of bill payments by date or expense category. Here are some advantages of online bill payment: • Convenience: You can pay all your bills at once from one Web site, without writing checks or buying stamps. You can access your bill-paying site while you travel or schedule payments up to 1 year ahead. Your bank will even cut a check for those who can’t receive electronic funds, like your babysitter. • Organization: EBPP services remind you if a due date is approaching and you haven’t paid your bill. This feature can save you lots of money in late fees! • On-time guarantee: Most services will cover late fees if a bill doesn’t arrive on time. • Record keeping: Many services save your payments so you can retrieve and print a record for the year (some go back several years). This is helpful at tax time. • Customization: You can arrange automatic payment for bills whose amounts don’t change, such as mortgage or car payments. With manual payments, you decide how much to pay and when. • Round-the-clock help: E-mail help lines are available at any time, or you can call for help during normal business hours. The disadvantages are: • Start-up issues: The initial setup for any type of online bill payment—providing names, addresses, phone numbers, and account numbers for your payee list—may be time consuming, though some Web sites have lists of major billers. But once you’ve entered the information, you simply select the recipient, fill in the amount, and click the “pay” button. With EBPP there is a lag time of several billing cycles while you change the address on all your bills to that of the service. • Monthly fees: Convenience isn’t always free. Banks typically provide the service for free with a checking account, although some require a minimum balance. Most other online payment services charge $5 to $15 to pay from 10 to 30 bills per month, with a per-bill fee of up to 50 cents for additional bills. • Float: Most bill-paying services immediately withdraw funds from your account when you hit the pay button, so you lose the “float,” the period between when you write a check and when the recipient cashes it, typically 3 to 10 days. However, some banks have changed this policy. Now the money stays in your bank account until payment is delivered. • Privacy and security: These are always a concern when you give a third party your Social Security number and bank and credit card numbers. However, research suggests that most identity theft comes from mail that’s stolen from garbage or mailboxes. So, eliminating the paper trail might reduce your risk of identity theft. Save some trees and some stamps, and consider using online bill payment.

Critical Thinking Questions: 1. What are the three main types of online bill payment services? 2. What are some advantages and disadvantages of paying bills online? 3. Based on the information in this box, describe a situation when online bill payment would be appropriate. Describe another situation when online bill payment would not be the best solution.

Sources: Donna Rosato, “Why Are You Still Writing Checks? It’s Never Been Easier or Cheaper to Do All Your Bill Paying Online,” Money, January 1, 2004, p. 94; Jenny C. McCune, “Your Online Bill Payment Options,” Bankrate.com, April 22, 2005, http://www.bankrate.com; Bruce Mohl, “Bank Sweetens Paying Bills Online,” Boston Globe, February 14, 2006; Jean Chatzky, “Ending the Paper Trail: It Makes Sense that Banking and Paying Bills Online Saves Time—and Trees. But Who Knew It Could Protect You from Identity Theft?” Money, November 1, 2003, p. 176; Steve Bills, “Will Presentment Growth Enliven Online Bill Pay?” American Banker, February 2, 2005, p. 17.