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Put away checkbook, move to online banking

Updated: May 3, 2013 12:14PM

Originally published: December 30, 2004

For the past seven years, I’ve been on a personal mission to convince people to move from writing paper checks to paying bills online. I think I’m getting somewhere! It’s now estimated that one-third of all consumer bills will be paid online by the end of next year. Even the Federal Reserve has recognized the trend as it closed two of its huge overnight check processing centers.

But my editor stubbornly refuses to change! And I know he’s not the only one who is content with the mindless task of writing a check, rewriting the same information in the check register, and then rewriting the amount on the paper stub you must enclose in the envelope with your check.

There’s a reason that online bill payment is the fastest growing use of the Internet (with the exception of online dating). It’s because your computer not only saves you time and money, but it gives you unprecedented control over your finances.

Perfect day for a resolution

Today is the perfect day to resolve to make a change for the New Year. You don’t have to pay every bill online, but you can. Paying that first bill is the biggest step you’ll take. Once you’ve seen how it works, you’ll pay more and more bills online. Here’s how to get started.

First, I want to make one point perfectly clear. There is far more risk of identity theft or fraudulent use of your checking account in a paper world than there is in the online world. Every online bill pay transaction is made using a PIN. That secret number brings you inside the high-security world of bank money transfers. And if, by some long-shot chance, someone gets your PIN and withdraws cash from your account, you are 100 percent protected against fraud.

Signing up for online bill pay is as simple as visiting your bank’s Web site. On the home page, you’re sure to find a little icon or spot that says “log on” to online bill pay, or “learn more.”

You can enroll online by filling in the required information. But every bank includes a toll-free number so you can contact an individual who will guide you through the process.

If you’re still hesitant, let me answer some basic questions:

Whom can I pay online? Anyone, from a utility company or credit- card issuer, to money you owe your sister. If it’s a big company, you insert its bill-pay address (from the stub on your paper bill), and your account number in the space provided. Money will be transferred electronically from your account to theirs. If you’re paying an individual, just insert the name and address, and a paper check will be created and mailed.

How will the company I’m paying know it’s for my account? As you set up each payee, you’ll be prompted to enter your account number so your money is withdrawn from the right account. And if paper checks are written, they have your name printed on them.

This seems to be a great act of faith, but believe me, I’ve been paying my bills online for seven years, and the money gets to the right account every time.

Can I still write paper checks? Yes. When you go online to your bank’s Web site and sign in to view your account activity, you can subtract the amount of the written check. You’ll need to record the name of the payee.

When does my check clear? It depends on whether the money is transferred electronically or a paper check is written. Each bank has slightly different rules. But you can schedule regular payments like a mortgage or car loan to be paid on a specific date.

How do I track my account? You can sign in to your bank account online at any time from any computer, and see your payment history. That’s why it’s better to pay your bills from your online bank account than to go to individual company Web sites to pay bills.

What if I miss my familiar paper check register? Go out and buy the latest version of Quicken or MicrosoftMoney for about $39.95. Just pop the disc in your computer, and it will go online and connect with your bank account. You can download online information from your bank account into the program.

Or you can pay your bills from your own computer software by sending instructions to your bank, and receiving information from your bank. The program creates a check register on your computer, categorizes your spending, and helps you track spending against your budget.

You’re not driving a horse and buggy, or watching black-and-white TV. So why are you still writing paper checks? It’s time to switch to online bill payment. Give it a try and you’ll be glad you did. That’s The Savage Truth.

Terry Savage is a registered investment adviser. Distributed by Creators Syndicate.

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