Needed: Easier Online Bill-Paying - Brief Article

Kiplinger's Personal Finance Magazine, Sept, 1999 by Stephanie Gallagher

Online billing holds promise, but few firms have signed on.

With no envelopes to address or stamps to lick, paying bills by computer is convenient. It's also a pain.

To pay bills using money-management programs such as Quicken and Microsoft Money, you have to load the software, dial up your bank via modem, fill out an online application and often pay $5 to $10 a month for the privilege--on top of any other checking fees you already pay. Banking over the Internet simplifies the process somewhat because there's no software to install. But you still have to schedule transactions several days before their due dates to allow the payment to travel from you to your bank to a central processor and finally to the merchant--often by paper check. It's up to you to make sure that the bill gets paid on time, so if something goes wrong you're responsible for any late charges.

A BETTER WAY? Online bill-paying should get simpler when electronic bill presentment catches on. With it, you sign up with a biller, giving the company permission to debit your checking account or, in some cases, charge your credit card. At most sites you get an e-mail when you have a new bill. Then you call up the biller's Web site and pay your bill. Electronic bill presentment is still offered by only a handful of companies, including American Express (www.americanexpress.com), First USA (www.firstusa.com), MCI WorldCom (www.wcom.com) and AT&T (www.att.com). The service is free.

Some billers are offering incentives to lure customers into online billing. For example, if you sign up for MCI One Net Savings to receive and pay your phone bill on the Internet, MCI will give you a rate of 9 cents a minute Monday through Saturday and 5 cents a minute on Sundays (as long as you make a minimum of $5 in long-distance calls each month).

Unfortunately, if you want to pay more than one bill at a time, your options are more limited. A few financial organizations, including First Union, Bank One and Schwab, offer bill presentment from as many as 40 or 50 billers for a monthly fee of $7 to $10. Quicken and TransPoint are gearing up similar billing services, but each has fewer than ten companies signed on.

THE OLD-FASHIONED WAY. One alternative widely used by billers is almost always free and doesn't require special software or an Internet connection: direct debit from your checking account. Direct debit puts the onus on the biller instead of you to get the payment from your bank account.

Some billers who offer direct debit also dangle incentives. Most student-loan servicers offer a 0.25-percentage-point discount on the interest rate, for example, and you may get a discount on your car loan if you pay by direct debit.

CREDIT CARDS

BEST DEALS

Low-interest premium cards Best if you carry a balance

                                             CASH-ADVANCE
ISSUER                      RECENT RATE(*)   RATE/FEE(c)

USAA Savings (G,P)              8.75%         8.75%/none
Pulaski Bank & Trust (G)        9.45          9.45/none
Metropolitan National (G)       9.48          9.48/none

                            ANNUAL      LATE/      TELEPHONE
ISSUER                       FEE     OVER LIMIT      NUMBER

USAA Savings (G,P)           $45      $20/none    800-922-9092
Pulaski Bank & Trust (G)      50       20/$20     800-980-2265
Metropolitan National (G)     35       20/20      800-883-2511

No-fee premium cards Best if you usually pay the balance each month

                                       CASH-ADVANCE
ISSUER                RECENT RATE(*)   RATE/FEE(c)

Wachovia                  10.15%        19.9%/4%
AFBA Industrial (G)       11.40         11.4/2
USAA Savings (G)          11.65         11.9/none

                       GRACE       LATE/       TELEPHONE
ISSUER                 PERIOD   OVER LIMIT      NUMBER

Wachovia              20 days    $29/$29     800-842-3262
AFBA Industrial (G)   25 days    20/none     800-776-2265
USAA Savings (G)      25 days    20/none     800-922-9092

Rebate cards Best of the cash-back cards

                                                 CASH-ADVANCE
ISSUER                          RECENT RATE(*)   RATE/FEE(c)

Amex Cash Back (P)                  17.99%        20.65%/2%
Jefferson Smart Visa                15.25         15.25/2
Waterhouse National([dagger])       12.75         12.75/2

                                ANNUAL   REBATE ON
ISSUER                           FEE      $12,000

Amex Cash Back (P)               none      $125
Jefferson Smart Visa             $25        120
Waterhouse National([dagger])    none       120

                                REBATE       TELEPHONE
ISSUER                          TERMS         NUMBER

Amex Cash Back (P)              up to 2%   800-843-2273
Jefferson Smart Visa               1%      800-443-5757
Waterhouse National([dagger])      1%      888-327-9962

(*) As of July 8; rates are adjustable, often tied to the prime rate.

(c) Cash advances frequently have no grace period; additional fees may be charged.