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The Ins and Outs of E-Payments

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Are you ordering far fewer checks for your bank account these days? Does a roll of postage stamps seem to last a lot longer? Like most people, you're probably performing many more financial transactions electronically, either by choice or because companies and government agencies have increasingly made it all but mandatory.

For example, most gyms that offer membership contracts require automatic deductions from a checking or credit card account. Utilities, mortgage lenders, insurance companies and others strongly encourage electronic payments.

In addition, many states now distribute benefits like unemployment, child support and disability assistance using prepaid cards instead of paper checks. And earlier this year, Treasury stopped issuing paper savings bonds at financial institutions, a move estimated to save taxpayers approximately $70 million in the first five years. (Savings bonds may still be purchased electronically at TreasuryDirect.gov.)

Among the many reasons electronic transactions have caught on:

They're cheaper. Businesses save on the costs of printing, processing and mailing millions of paper checks and statements; and with first-class postage costing 45 cents, customers rack up savings over time.

They're faster. Bill payments, funds transfers and direct deposits to your bank account or prepaid card occur the same day (often instantly), versus being delayed in the mail. And, if you're prone to forgetting to mail payments on time, auto payment will protect you from late fees and overdraft charges. Plus, people who file income taxes electronically generally get their refunds within three weeks, versus six weeks for paper tax returns.

They're convenient. You can choose one-time bill pay, where you first review your bill and then authorize payment, or recurring bill pay, where your bills are paid automatically at a scheduled time. You can usually have funds drawn from either your checking or credit card account -- just check to be certain.

Most utility, phone and cable companies let you automate full payment when the bill comes due, as they usually don't allow partial payment. With others, like insurers or credit card issuers, you can arrange to have at least the minimum payment withdrawn automatically by the due date (to avoid late fees), or you can manually choose a specific larger amount (if you like to pay off your account each month).

They're pro-environment. According to PayItGreen, by switching from paper to electronic billing, statements and payments, each year the average American household would save 6 pounds of paper and avoid producing 29 pounds of greenhouse gas emissions -- the equivalent of saving four square feet of forest.

They're safer. Even in these high-tech times, old-fashioned mail theft remains a major problem. For example, in 2010 more than 540,000 mailed federal benefit checks were reported lost or stolen and had to be replaced.

That doesn't mean electronic transactions are risk-free. As with email or any kind of online activity, you should take precautions to protect your computer (and cell phone) from being hacked. For example:
  • Make sure your anti-virus and anti-spyware software is up-to-date; only download information from trusted sites; and don't click pop-up windows or suspicious links, even from people or businesses you know. These tricks commonly are used to install spyware, which records your keystrokes to steal confidential information.
  • When making online payments, look for safety symbols like a padlock icon in the browser's status bar, an "s" after "http" in the URL, or the words "Secure Sockets Layer" (SSL). These demonstrate the merchant uses a secure page to transmit personal information.
  • Review credit card and bank account statements regularly -- I check them online daily -- and report duplicate bill payments or suspicious/unauthorized charges to the card issuer. Ask whether your credit or debit card offers "zero liability," which means you won't be responsible for unauthorized or fraudulent purchases.
  • Regularly order your credit reports from the three major credit bureaus, Equifax, Experian and TransUnion, and review for errors or fraudulent activity. You can order one free report annually from each at AnnualCreditReport.com, or more frequently for a small fee from each bureau.
  • Sign up for email or text alerts from your bank to track purchases and deposits. They're triggered when the transaction meets certain criteria you select; for example, purchases over a certain dollar amount or pending payment deadlines.
  • Whenever logging onto the Internet at Wi-Fi hotspots or other locations whose server may not be encrypted, be extra cautious before conducting online banking or other password-protected services.
  • Create complex, random passwords and change them regularly.
  • Shred paperwork and receipts containing personal or account information once they're no longer needed.
Be a savvy consumer whenever using a bill-paying service:
  • Ask if any fees are involved.
  • Before signing the agreement, make sure you understand and accept the terms.
  • To stop service, you must notify the merchant as well as the bank/credit card company. Cancellation may take a month or two to become effective, so plan ahead.
  • If your payment card expires, the merchant will need new card information to ensure uninterrupted service.
  • Track expenses carefully and keep your budget up to date.
Many great resources can teach you how to protect your personal and account information, including:
  • StaySafeOnline.org, a website filled with tips for safe Internet use.
  • The FBI's Be Crime Smart page, which highlights the latest scams and tells you how to report crime and fraud.
  • The Federal Trade Commission's ID Theft, Privacy and Security page, which contains extensive information about identity theft, privacy and information security.
  • My employer, Visa Inc., offers VisaSecuritySense.com, which contains tips on preventing fraud online, when traveling, at retail establishments and ATMs, deceptive marketing practices, and more.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.