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The Basics

Time to stamp out bill paying by mail

More than ever, Americans have taken to online banking to save time and money. The latest postal rate increase is a good excuse for the rest of us to connect. 

By MarketWatch

As of today, the first-class postage rate is 41 cents.

If you're like most Americans, you pay 20 to 30 bills per month. So for those of you still "going postal," the 2-cent increase will cost you about 40 cents to 60 cents per month. Big deal, you say.

But as online banking improves, I see the increase as a clear tipping point. If you're still in the shrinking postal crowd, it's time to take another look.

For the first time, bill payments made online exceed paper-check bill payments among online households, according to the 2007 Consumer Bill Payment Survey, just released by Harris Interactive and The Marketing Workshop. About 74% of households pay at least one bill online.

Granted, online banking is hardly new. During the dot-com days, intrepid onliners used various financial-software packages, including Microsoft Money and Quicken, to help automate their bills and monthly statements.

But they had to learn the software. Then they printed lots of checks anyway, because most recipients weren't set up to receive electronic payments. And banks charged fees for online transactions. The software packages helped you categorize expenses and print neat checks, but they didn't save much time or money.

Now, I think we're finally saving time and money.

Banks change their tune

I've always admired the nerve of banks to charge for online banking. It saves them money, too! According to an IBM study, it costs banks 9 cents to 15 cents to process a paper check and about 1 cent to process an electronic transaction. Yet banks pushed online bill payment as a "value add" service, often charging $5 to $10 per month or more.

Though it's expensive for them to maintain both paper and paperless systems, banks have also turned the corner and now see the future as electronic. So monthly fees are gradually being set aside or more commonly bundled into packaged banking services such as Wells Fargo's PMA and Advantage checking accounts.

In addition to bill paying, banks are now guiding us toward going paperless altogether. No more monthly statements, canceled checks or check images in the mail.

We'll save a lot of trees and, better yet, be able to access our records when and how we want. No more digging through file cabinets to find a canceled check; online statements can be organized as you please.

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To be sure, the incentives are modest. Sovereign Bank teams up with the National Arbor Day Foundation to plant a tree for every new e-bill account activated through the end of May. Bank of America donates $1 to The Nature Conservancy's reforestation programs.

Plusses and minuses

Online banking and bill pay won't make you wealthy. But you'll save time, improve financial security and become more organized and, yes, you may save a few bucks. Quite simply, the advantages have grown, and some of the downsides have gone away:

  • Complete control. With online banking you can time your payments and get real-time alerts. The savings comes from avoiding late fees and spending less time resolving problems. An improved credit rating can save down the road.
  • Better security. Here's another tipping point. In the early days, online transaction security was the concern. Now, mail theft is on the rise as criminals realize the treasure-trove of information lying in outgoing mail. With a caveat, I'll explain that I now think online bill pay is more secure.
  • Better organization. Less paper means less clutter. Says Things in Place founder Standolyn Robertson: "By simply signing up at their local banks or portals, usually for free, consumers can give themselves the gift of time and the peace of mind that comes from organization."

There are still a few things to watch out for:

  • Learning curve. For those of us used to writing checks and mailing bills, it takes a while to get used to online banking, even with improved online banking tools.
  • Still not a complete solution. Adoption rates are getting better, but you still have to write a check to pay for those Girl Scout cookies.
  • Secure access. Here's the caveat. The greater amount of online "personal finance" has brought new data-piracy paths. Now it's become a no-no to do any financial transactions from any "public" network, such as a hotel business center or wireless network. It doesn't mean you can't use these networks, just don't use them to access financial accounts, especially if a password is required.

Bottom line: you no longer have to be a software or Internet geek to do your banking online. It's getting easier and cheaper. And it will get even more so as the rest of us make the switch.

This article was reported and written by Jennifer Openshaw for MarketWatch.

Published May 14, 2007

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