Is Desktop Banking for You?

Is Desktop Banking for You?

SAVINGS: Online bill management saves both time and money.

CLICK: Your financial institution can help you consolidate payments.


Every year, paper checks by the billions are sorted, processed, shipped through a complex network, processed again and scanned electronically or returned to the writer by mail. That's why your bank would like you to handle your accounts payable electronically—and they're making it easy and profitable for you to do so.

Until recently, the idea had been slow to catch on. Change doesn't come easily to many of us, especially when it comes to how we handle our money. Fears on the part of many business owners and consumers about the security of paperless transactions have presented formidable hurdles on the road to a checkless society.

Lately, however, the sluggish stream of Americans viewing and paying bills online is becoming a raging torrent. At the current cost of 39 cents postage for each check mailed, plus the cost of buying checks,the savings in money and time are proving to be an irresistible lure to computer-savvy business owners. According to Jupiter Research, nearly 30 million Americans were signed up to view their bills online in 2004, with half of those paying at least some of their bills that way. By the end of this year, Jupiter estimates that more than 41 million Americans will be viewing bills online, with two-thirds of them paying electronically.

Service providers now offer a wide variety of easy-touse systems to pick from, and experts say that security is a minor concern. "Online bill payment is at least as secure as conventional payment [paper checks]," says Elizabeth Robertson, senior analyst at the research firm, TowerGroup.

Is it time for you to jump on bandwagon? Will you and your restaurant benefit from paying your bills electronically?

There's no shortage of people who say that it's the only way to go. "I love not having to write and mail checks each month," says Allison Winn Scotch of New York. "Now I just log onto my bank's website (Citibank) when I have a moment. No more worrying about having stamps and getting to a mailbox."

"Paying bills online is a real timesaver for me," says small business owner Laura White. "I save from two to three hours a month since I started paying my bills online."

Paying Bills Electronically Is Quick and Easy
Improvements in technology and user-friendly websites make online bill paying almost as easy as logging on to check your e-mail. If you'd like to cut down on the amount of paper you're handling, there are systems that allow you to eliminate receiving paper bills in the mail in favor of viewable online bills.

If you're really lazy, you may sign up for a system to pay recurring bills such as utility and mortgage payments that requires no action at all on your part.

If you insist on the comfort of receiving traditional bills by mail and deciding when to pay each, there are online systems to accommodate you. There's even a way for people who don't own a computer to pay some utility bills electronically. Each of these systems provides security, confidentiality and easy record-keeping.

How Does Electronic Bill Paying Work?
There are three basic types of electronic bill-paying systems from which to choose:

  1. Individual creditors that allow you to pay only their own bills by logging onto their individual websites.
  2. Banks and other financial institutions as well as third-party services (aggregators) that allow you to pay all of your bills from one website. Users of financial management programs such as QuickBooks from Intuit Software are able to sign up for online bill paying from within the program.
  3. Signing up with individual creditors to deduct payments automatically from your checking account with no action on your part necessary. Technically, this isn't online bill paying, since you don't have to own a computer to take advantage of it.

These automatic payments, used by many utilities and some credit card companies, are arguably the easiest and most convenient form of electronic bill paying.

"I signed up with my gas/electric, telephone and water companies for their automatic bill paying service," says Al Woods, who doesn't own a computer. "I get my monthly bills in the mail as before, but I don't have to do anything except notate the deduction in my check register. I've been using the service for three years and never had a problem. I save time and postage expense with three fewer checks to write and mail each month."

Woods reports that each bill is notated with the exact date on which the payment deduction will be made, usually two to three weeks in advance. That allows plenty of time to contact customer service if there are any questions about the bill. Most providers do not charge for this service.

Telephone giant Verizon is among the many utilities that allow customers to pay their monthly bills through automatic deductions from their bank or credit union accounts.

To find out if your local utilities offer bill paying through automatic deductions, call the customer service number on your bill and ask for details.

Paying Online at Each Creditor's Website
This is the preference of those who like the feeling of control that allows them to visit the website of each creditor when they are ready to pay a bill.

Enter the password assigned when you sign up and you will see a screen showing your current balance. From there, the system leads you comfortably through the process of paying your bill. A few clicks of your mouse and the system electronically deducts a payment from your checking account. To keep your own records in balance, you enter the transaction in your check register just as if you had written a check.

While the need to log onto each creditor's site is considered a nuisance by some, the convenience of having a payment credited immediately, or at least within one day, is an important advantage to others. "With online bill paying, I can pay the bill on the day it's due," says Lisa Iannucci, Poughkeepsie, NY, "so I don't have to worry about sending the payment and hoping it gets there on time."

One-Stop Shopping
Of course, logging onto the individual site of each creditor to pay bills can be time-consuming. With many small businesses writing 30 checks or more each month, the convenience of paying everything from utilities, to credit card bills, to suppliers from one site is a major attraction.

Banks and other financial institutions, brokerage houses and third-party service providers are competing to sign you up for what many consumers consider the most convenient form of on-line bill paying.

"I like pretty much everything about it," says Lynn Ginsburg, Boulder, CO. "I use my own bank so I can do everything from one place: transfer between accounts (which I often do before paying bills), keep track of my balances to know how much I have in the account before I pay, etc. It's very easy to pay bills, set them up for recurring or single use and check the history of whom you've paid."

While some service providers limit payees to larger creditors such as credit card issuers, department stores and utilities, others enable you to pay virtually anyone with a U.S mailing address. Wachovia Bank is typical of these.

When you first log on to the Wachovia bill-paying website, you will be asked to create a list of payees, including names and mailing addresses. Once you create your list, you may add or delete names at any time.

To pay a bill, simply click on the proper payee and enter the amount to be paid. A verification screen then pops up allowing you to review the transaction you have authorized. Once you're satisfied that all is correct, a click of your mouse sends your payment on its way.

Keep in mind, though, that your payment may not be dispatched instantaneously through cyberspace. Unlike individual creditors with online bill-paying websites, many single-site providers—Wachovia is an example— actually create and mail a paper check to any payees not set up to accept electronic payments. In those cases, you must allow up to a week for the postal service to deliver your payment.

Online Bill-Paying Companies
A number of third-party companies (aggregators) are also competing for your business. Unlike many banks that offer the service free for their own customers, aggregators charge a monthly fee for their electronic bill-paying service. Companies like Yahoo Finance, PayTrust.com and Checkfree.com charge between $5 and $15 per month for their service depending on the features chosen.

We asked Judy DeRango Wicks, VP of CheckFree.com, why someone who could probably find a free service would be willing to pay for on-line bill-paying. "We agree that rather than pay a fee, the first place you should look when you want to get started paying bills online is your own bank's website," she told us. "In many cases today, the bank's service is free to everyone, or free to those who meet certain parameters set by the bank.

"For those who can't get this service from their financial services provider, CheckFree offers two services, one of which is free—www.mycheckfree.com. It offers all of the e-bills we have in distribution, nearly 300 e-billers. The CheckFree 'pay anyone' service is also available for a fee to consumers whose banks don't offer electronic billing and payment."

Not Everyone Is on Board
Of course, even ardent fans of online bill paying have some complaints. "When I schedule a payment, the actual payment date is often a whole week from the time I authorize it," says Lisa Beamer, Pittsburgh. "That seems excessive to me for something that is being done electronically. I assume that when I put a check in the mail that it's going to get to where it needs to be in less than a week."

And there are others who remain unconvinced about the security of online payments. "I guess I just feel safer with my collection of cancelled checks to prove I paid my bill," says Will James, San Francisco. "I have trouble getting used to the idea of someone else paying my bills."

Still, if the current trend is a reliable indicator, taking pen in hand to pay your bills seems destined to become as archaic as carbon paper and typewriters.

In case you're still unconvinced, consider dipping a cautious toe in the online bill-paying waters. Sign up with just one creditor, pay one bill and sit back to see what happens. Chances are you'll be hooked.

William J. Lynott is a former management consultant and corporate executive who writes on business and financial topics for a variety of consumer and trade publications. You can reach him at [email protected]

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