Train Your Mouse to Pay Bills
When your 76-year-old mom pays her bills online, you know it's hit the mainstream. "I wish I had the nerve to start sooner," says my mother. "It saves so much time."
So what's your excuse? Fear of online thieves? You like licking envelopes? Maybe this is the year to join my mother. After all, 27 million Americans do it, up from 10.6 million in 2001, according to researchers at the Gartner Group.
Most large banks and credit unions offer the service gratis to customers. Payee websites and bill-paying services like CheckFree.com or Paytrust.com typically charge a fee. You can also use personal finance software like Microsoft Money or Quicken.
The biggest benefit is on-time payments. You can arrange for recurring payments, like your mortgage, to be sent automatically. You can also schedule payments up to a year ahead. Imagine--no more late fees! (Not to mention the money you'll save on stamps.) Plus, you can transfer money between a savings and a checking account in the wee hours.
Starting is seamless. If your bank offers the service, simply set up an online user ID and password on its website. Then create a payee list from the bills you receive. You'll need to hold on to your checkbook; not every biller is set up for online payment.
One perennial complaint: You lose the float. When you mail a check on, say, the 10th, it might not be cashed until the 15th. That gives you a little extra time to make sure there are funds to cover it. And if your dough is in an interest-bearing account, you score a fraction of interest for a few more days. With online paying, there's a float--only in the bank's favor. If a payment is due on the 15th and you schedule it for the 11th, that's the day the money disappears from your account.
The idea of putting a bank account number on the Internet is scary, and with good reason. Even though any actions you take are in a secure and scrambled area, a hacker needs just a password and a user name to gain access to most online accounts. So you should check your accounts at least every few days and act quickly if you discover something suspicious. Under federal banking law, you're liable for only up to $50 if there is an unauthorized online transaction reported within two business days. You could be responsible for up to $500 if you wait longer. Delay more than 60 days after receiving a statement with bogus transactions, and you might be responsible for all of them.
Bank of America is the first major bank to offer extra protection. The free service, called SiteKey, began rolling out in June and will reach all states by early '06. Customers pick an image, write a phrase, and pick three challenge questions (like "What was your high school mascot?"). When logging on, you need to see the right image (otherwise you could be on a fake site out to steal your info). And if someone tries to enter your account from an "unrecognized" computer, your ID and password won't be enough--the individual will need to answer a challenge question, too.
If you're still leery of someone tapping into your bank account, be patient: A fingerprint-scanning device loaded directly on your computer is in the works. Talk about bill paying at your fingertips.
This story appears in the December 26, 2005 print edition of U.S. News & World Report.