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Online Billing, Part 2: Problems and Possibilities

By Jack M. Germain
Sep 18, 2007 4:00 AM PT

While bill payers and many businesses have been slow to adopt cyber billing, consumers are much more accepting of paying their monthly bills electronically. Still, consumers often face a struggle with merchants who don't make e-payments a priority or the process of paying online easy to set up.

Online Billing, Part 2: Problems and Possibilities

Acceptance of e-billing is not as favorable yet as it should be, Mike Bodetti, president and CEO of TnT Expense Management, said in Part 1 of this series.

Some merchants provide their customers with both paper and e-bills, with an option to opt out of monthly mailings. Few merchants have completely adopted paperless billing.

"There is no reason or advantage for using paper bills. Paper billing entails added costs such as storage, archiving, shredding," Bodetti told TechNewsWorld.

Proponents of paying bills online raise much the same argument. Two out of every three households with Internet access pay bills online, according to Eric Leiserson, senior marketing analyst for CheckFree.

"Consumers are more protected against theft paying bills online than leaving a paper trail. Most ID thefts occur with paper transactions, not online payments," Leiserson told TechNewsWorld.

Safe and Convenient

Getting involved with online bill paying is far from troublesome, proponents say. It can save time, save money, save hassle and even improve your credit score by helping pay your bills on time.

"Of all the conveniences the Internet has brought -- buying books and CDs day and night, receiving work documents in a flash and enabling free communication with friends around the globe -- one of the most useful is online bill payment," Andrew Housser, co-CEO of Bills.com, told TechNewsWorld. Bills.com is a one-stop online portal to educate consumers about all things related to e-commerce.

Many credit card companies and banks handling store credit accounts put online payment instructions on each bill. Consumers can pay the bill directly from that Web site through a wire transfer from their checking account, often for free. Many banks provide similar online bill paying services from their own Web sites. Consumers have a third option by using online bill paying services such as CheckFree or other companies.

"I've been paying bills online for several years, and the biggest pitfall so far is when the company silently changes its return address. I've got my online payees set up, so I keep sending payment to the old address until they start getting returned. Companies that receive online bill payments should notify their customers, in the statement and by e-mail if possible, when their addresses change," Sally Herigstad, a Certified Public Accountant and author of "Help! I Can't Pay My Bills," told TechNewsWorld.

The Setup

Consumers have two types of online bill pay. The first is to set up with the consumer's bank or with financial software such as Quicken or Microsoft Money. The second is set up with the company that issues the bill. There are pros and cons to both, warned Elizabeth Potts Weinstein, a retired Certified Financial Planner, lawyer and owner of The Wealth Spa.

Paying online through one's bank is useful to both pay regular payments that are the same every month, such as mortgage or rent, and to pay bills that can be sent directly from the company, such as utilities. Paying bills through a company tends to be used for payments that fluctuate from month to month, like utility payments, she said.

"Understand how online bill pay works. Some consumers sign up for online bill pay services through their banks or credit unions. Others use stand-alone services. Independent bill pay services offer predictable fees and stability, even if the consumer changes banks. Some companies charge for the service, while others include it free, generally for individuals with fewer transactions each month," explained Housser.

Not Foolproof

Regardless of which online bill paying method is selected, consumers have to pay attention to monthly statements and changing circumstances. It is easy to lose track of things after completing the one-time set up.

For instance, one danger in using electronic bill pay's automatic pay feature is not noticing an interest rate increase in a credit card or adjustable mortgage account. Then, you may underpay your payment, unless you are regularly reviewing your statements.

"This happened to me with my home equity line of credit when it moved from the six-month fixed rate to the adjustable rate," said Weinstein. "I received an embarrassing call from my mortgage provider to bring my payments back up to date."

Automated payments can be a huge help to consumers. This feature on online bill paying can insure that no late fees incur because of forgotten bills. This goes a long way to safeguarding one's credit rating.

"Obvious advantages for consumers using automated payments for recurring bills is having full control of payment and being protected against forgotten or late bills. The customer sets up the options and can monitor it," said Leiserson.

Payee Beware

Consumers should check their account balances to make sure the financial service actually issued payment on time. Also, consumers must monitor their vendor account balances to make sure that electronic payments are credited to their accounts without incurring late fees, financial experts recommend.

Some vendors do not post electronic payments for several weeks after receiving payment because of internal handling procedures. The big danger is that some companies take two or three billing cycles before the automatic payments go through, advised Weinstein.

The user may not realize that the automatic payments have not been made and may not be paying the bill (or even reviewing the bill) and does not know that the account has become delinquent, she explained.

"Last spring my cable was turned off, and when I called the company, I realized that I was late on my payments because the automatic payment had not gone through without me realizing. I had to make up two payments and make the next month's payments before the automatic payments went through."

Online Billing, Part 1: Leaving the Paper Trail Behind


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