Postage rate hike encourages consumers to consider electronic bill paying

Posted: Friday, July 05, 2002

NEW YORK (AP) -- With the price of a first-class stamp up to 37 cents, many consumers are taking a fresh look at reducing their mailing costs by paying their bills electronically.

The average American pays about a dozen bills a month, so a postage increase of 3 cents per letter isn't going to break the bank. Still, experts say, it might be the final nudge for many to shift to e-payment options.

A phone survey conducted for the Direct Marketing Association found that more than one-third of respondents indicated they would look for bill paying alternatives to first class mail. Fully 42 percent of those 25 to 34 said they would seek alternatives.

''Two things are in place to warrant these results,'' said DMA economist Peter Johnson. ''It's enough of a price increase to make people sit up and take notice. And there are alternatives in place at low or no cost.''

Johnson said it bodes poorly for U.S. Postal Service efforts to increase its revenues.

''This is the first generation that can say, 'I don't like your 3 cent increase. I don't like standing in line to buy stamps. I'm going to move my bill paying online, and I don't care what happens to your finances,''' Johnson said.

The quickest way to reduce the cost of paying bills is, of course, to cut down the number of bills you pay each month. That generally translates to getting rid of credit cards you don't need or paying insurance premiums quarterly or annually rather than every 30 days.

William Nelson, executive vice president of NACHA-The Electronic Payments Association, said there has been tremendous growth in the use of electronic payment methods since last year, when the grounding of jets after the Sept. 11 terror attacks and the anthrax scares interfered with mail delivery.

''People saw that the electronic stuff kept working'' through the crises, Nelson said. ''They're finding it's safe, cheaper than mail -- and it saves trees.''

There are a number of e-bill pay alternatives.

The oldest and still highly popular electronic option is ''direct payment.'' It's the reverse of ''direct deposit,'' which millions of Americans use to get their pay checks and Social Security checks safely into their checking accounts.

With direct payment, consumers can instruct a company to debit their bank account monthly for the amount they owe. The system is especially good for bills that are the same every month, like mortgage payments, insurance premiums or level-payment utility plans.

Another increasingly popular option is going each month to the Web site of a company like a telephone company or a credit card issuer and paying online by authorizing a transfer from a checking account.

The greatest growth, however, has been in online bill paying, either though a specialty site like or via a commercial bank, savings bank or credit union. Even the U.S. Postal Service has an e-bill paying site at

John Rosenfeld, an e-commerce executive with Bank of America in San Francisco, said the number of customers regularly using the bank's bill paying service has risen from about 550,000 in December 2000 to 1.2 million now.

''Online bill paying is a far more convenient way to pay bills than any other medium,'' Rosenfeld said. ''You can choose between writing a check, tearing off the bill, stuffing everything in an envelope, finding a stamp and getting it sent vs. 2.5 seconds on your computer.''

He added that online bill paying, which is free to all of Bank of America's online banking customers, also can be helpful to consumers who worry about missing due dates.

''You can set it up so that every month, it automatically pays the minimum on your credit card,'' Rosenfeld said. ''You can turn that off any time you want and make higher payments, but otherwise you'll know you're covered and you'll never have a late fee.''

Peter F. Sinisgalli, president of CheckFree Corp. in Norcross, Ga., which designs electronic bill payment systems, said he believes that as more consumers use the Internet for commerce -- already 40 million households shop online -- the more comfortable they become doing financial transactions online.

''It's good for billers, too,'' he said. ''Studies indicate the average biller will save more than $1 per bill by moving from a paper-based system to an electronic system.''


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