Financial Resource Center

Online Bill Services Ease Mundane Task

by Louisa Downey / October 10th, 2000

It's the fifth of the month and (gulp!) you forgot to mail your credit card payment before leaving for vacation. Wouldn't it be nice if you could take that hamster's nest of bills on your kitchen table and let someone else deal with it? Well, you can.

By 2003, industry analysts expect 25 million U.S. households to pay two billion bills online. Online bill payment and presentment services, as they're known, won't necessarily save you money, but they can save you time. As long as you have Internet access and a Web browser, you can cut a check at 2 a.m. in Trinidad, or noon in New York.

It sounds convenient. But is it safe, secure, and affordable? There are several things you need to know about the rights and responsibilities that come with online bill payment. Here are a few of the most commonly asked questions:

     Related links

     Keep your
     information secure

How does online bill payment work?
Electronic bill payment is user-friendly. All you need is Internet access and a Web browser, such as Netscape or Microsoft Internet Explorer. After you've been authorized to use the service, you set up a payment schedule for regular bill payments such as your mortgage, or one-time payments for a birthday gift. You indicate the payee, the date the check must be sent, and how often you want the bill paid. You then authorize the online service to pay the bill.

Several vendor companies, such as utility companies, can both send and receive bills electronically, while others work only with paper (many bill payment services scan your paper bills and send them to you electronically).

Either way, the process is the same for the consumer: The bill payment service either cuts a check on the date you specify, or transfers the money from your account using the Automated Clearing House (ACH). The ACH is the secure transfer system that connects all U.S. financial institutions. To be safe--that is, to make sure your payment arrives on time--schedule your payments to be sent five to seven days before the due date.

The service withdraws the funds from the account of your choosing, and the transactions appear on your monthly credit union share draft statement.

Unlike your financial institution, which may sometimes cover a temporary overdraft, online bill payment services charge penalties for bounced checks. If you're used to playing checkbook roulette, online bill payment is not for you.
     You don't want
     your personal
     information to
     become a commodity
     on the Internet
     black market,
     and neither do
     reputable services.

Where do I sign up?
Considering the personal nature of the transactions you're conducting, you may feel more comfortable subscribing through a trusted financial institution such as your credit union. Many financial institutions subscribe to a service such as Checkfree.

"All of your bills are managed in one place on the Internet," says Erin Cullen, Microsoft's product marketing manager. "You don't have to dig in the drawer for that Macy's bill."

You also can sign up directly through those Web sites or through a portal such as MSN MoneyCentral.

What information will I have to give?
To sign up, you'll have to fill out a registration form that asks for personal information such as your Social Security number and your mother's maiden name. Be prepared with the names and addresses of people and companies you want to pay, as well as your credit union share draft account information. The service will send you a confirmation number that lets you log on to the system.
     To make sure
     your payments
     arrive on time,
     schedule them
     to be sent five
     to seven days
     before the due date.

What will the online bill payment service do with my personal information?
Online bill payment services ask for personal information for verification and identification, and should have stringent policies stating that they will never sell or pass on your information to any company, government, or third party. Ask to see those policies.

How much does it cost?
Fees vary depending on the number of checks you write and the service you choose. Transpoint offers a standard service for $2.95 that allows you to write up to 20 checks a month to more than 750 major vendors, including utility companies and department stores. Its premium service costs $5.95 and allows you to write up to 20 checks to the same 750 companies, plus just about anyone else from your babysitter to your florist. You can write additional checks for a nominal fee. Other online bill payment services offer similar plans.

How can I keep track of my transactions?
The bill payment service you choose should provide a comprehensive, real-time system for tracking and editing the bills you've paid, scheduled, or stopped. The service usually will store your account activity for six months to a year. It's crucial that you keep your own records of all the transactions you have made, and check your regular credit union statements carefully.

Is there anyone I can't pay?
You can write a check to almost anyone in the U.S. except for the Internal Revenue Service. You also must make court-ordered payments, like child support, the old-fashioned way.

Are my transactions secure?
You don't want to see your personal information become the hottest commodity on the Internet black market, and neither do reputable bill payment services. Many use a strong 128-bit encryption that scrambles your information so a third party can't read it. You'll also be given a password and user ID. Transpoint also conducts regular audits and hires an outside firm to test the system, says Cullen. Still, it is ultimately your responsibility to ensure the provider you choose will protect your information.

USPSeBillPay automatically signs you out of a session if you're inactive longer than 10 minutes. It's best if you sign out immediately after you finish scheduling and making payments.
     Keep records
     of all the
     you make.

What happens if someone withdraws money from my account illegally?
The Electronic Funds Transfer Act (EFTA) states that you can't be held liable for more than $50 if someone uses your account without your authorization. Read the fine print, however, as the act only applies for a certain number of days after you discover the error. Checkfree and Transpoint clearly outline their guarantees on their Web sites, and have a team of customer service representatives available 24 hours a day, 365 days a year. Your financial institution may have other requirements for reporting a problem.

What should I do if I find an error?
Errors are rare, but if you find a discrepancy, call or e-mail the service immediately. Put it in writing and mail it, as well. Most services will conduct an investigation into the problem and get back to you in a few days. In many cases, if the error is theirs, they will contact the vendor who sent the bill and try to resolve the problem for you.

Related links
Online bill payment services E-commerce links

Keep your information secure

  • Use a secure browser. Most computers come with a secure browser already installed. You also can download some browsers free over the Internet.

  • Keep records of your online transactions.

  • Review your monthly credit union and online statements for billing errors or unauthorized purchases.

  • Read the policies of the online bill payment service, particularly those concerning security, errors, and use of your personal information.

  • Never give your password to anyone online, even to your Internet service provider.

  • You can file a complaint with the Federal Trade Commission by contacting the Consumer Response Center toll free at 877-FTC-HELP [382-4357]; TDD 202-236-2502; or by writing to Consumer Response Center, Federal Trade Commission, 600 Pennsylvania Ave., NW, Washington, DC 20580.
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