Is It Safe to Pay Bills Online?

Looks like she's among the more than 64 million online bill payers. But is she putting herself and her finances at risk by doing so? See more money scam pictures.
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Thanks to the growing popularity of online banking, putting pen to check may become a relic of the past -- like the bag phone and brick-and-mortar movie rentals. From banks and corporations offering electronic bill pay to bill-pay enabled software and specialized bill-pay Web sites, writing checks just got mobile.

Now, instead of sorting through paper bills delivered by mail carrier, then balancing a checkbook, and writing and mailing checks, consumers can track debits in real-time, electronically budget future payments and transfer funds to pay bills sans paper -- which can be as beneficial to one's long-term organizational habits as it is to the environment. And more people are coming on board: A recent study revealed more than 64 million households pay at least one bill online [source: Bell] and, according to a report by the Federal Reserve System, electronic payments now exceed two-thirds of all non-cash payments.


Paying bills online, however, is more than just a streamlined version of a traditional method. It also offers record-keeping benefits, thanks to the ability to generate online reports and search transaction histories. Forgoing paper, as well as the carbon footprint required to deliver it to one's home, has obvious environment-preserving benefits. If one in five households switches to electronic payments, statements and bills, it could save an estimated 1.8 million trees annually [source:].

Unfortunately, if you've joined the masses dispersing the fruits of their labor through online bill pay, there's also cause for alarm. With all this convenience comes risk -- both real and perceived. Even tech-savvy bill payers battle fears about privacy infractions and identity theft. Others have nagging worries that spyware may secretly be installed to record every keystroke (including passwords). Still more wonder if fake Web pages -- that look identical to a bank's Web site -- might be used to intercept their user information.

Still, there's mounting evidence that paying bills online may actually reduce the risks of identity theft and related fraud. Discover why on the next page.


What Can Go Wrong Paying Bills Online?

The real shocker? It may actually be safer to manage your personal finances electronically. In fact, researchers find it's more likely a thief will lift financial information -- like a bill or a bank statement -- from your mailbox than from your computer [source: Huddleston].

Yet there are dangers. Although it's possible to pay bills electronically while you're away from home, we have one word of advice: Don't. Putting personal information into a public computer, like the ones you'll find at libraries, airports or hotel business centers, introduces risk. Criminals can access these computers, install key-logging software and voila, your credit card numbers, passwords and PIN numbers are ripe for the picking. You're not much safer on your personal laptop or smart phone if you connect to a public Wi-Fi network, where even moderately tech-savvy criminals can steal your data right out of the air.


So now that you're back in your home office to pay bills, which browser offers the most security? The three primary Internet browsers now available -- Opera, Internet Explorer and Mozilla Firefox -- each have security measures like encrypted connections or warnings when a Web site appears unsafe. Of course, if you're not updating your browser as each new browser version is released, these safety measures will lag.

It's also a good idea to change your personal finance passwords once every two months; buy and install anti-virus and anti-spam software and update the software frequently [source:]. Type Web addresses into your browser instead of clicking on links sent via e-mail. This will help protect you from phishing, which occurs when a bank, company or organization is impersonated by e-mail; consumers receive fake e-mails, believe them to be legitimate, and then share personal or financial information. The e-mails also may contain links that, when clicked, lead to fake Web sites that capture user identities and passwords.


How to Minimize the Risks of Paying Bills Online

Many companies have Web sites through which you can pay what you owe them. For example, you can pay your Chase credit card on its corporate Web site, then navigate to Capital One's Web site to do the same. In addition, many banks and credit unions offer online bill pay services, making it possible to pay multiple bills from one online location. Some banks may charge a nominal fee for online banking, but many offer the service at no charge to customers.

There also are third-party online bill pay services provided by Web sites like and These free services allow consumers to receive, view and pay online bills from one secure Web site. You can also pay bills online with personal finance software. Quicken2010 Deluxe (sister company of and owned by Intuit) is one example.


Wherever you elect to pay bills, you should first make sure the Web site is secure. Web page addresses, also known as URLs, begin with "http." However, to pay bills online, the Web page should always start with "https," which signifies a secure connection. Also, look for a padlock icon, usually in the top or bottom right corner of the browser window. Clicking the lock will reveal the site's security certificate [source:].

Once you've decided where to virtually pay your bills, you must decide whether you want to pay them manually or automatically -- or both. Paying bills on a case-by-case basis is a solid move when the amount of the bill varies, as with utility providers, or when the bill is infrequent, as with bi-annual insurance payments. If, however, the dollar amount stays the same month-to-month, scheduling a series of future automatic payments can eliminate the risk of late fees. Keep in mind that automatic payments will be withdrawn even if you don't have enough funds in your account, and this can trigger overdraft fees.


More Ways to Reduce Risk When Paying Bills Online

Using a credit card, rather than a debit card, affords a few additional protections when paying bills online. Under federal law, fraudulent credit card usage can be disputed with the card issuer and payment can be legally withheld until it is resolved [source: Barrett]. The downside is that credit cards aren't linked to your bank account. Unlike a debit card, which automatically deducts transactions from your checking account, a credit card can result in unpaid balances and pending interest charges -- unless you are disciplined to pay the balance each month.

If worries about identity theft and financial fraud are keeping you from paying bills online, consider a disposable transaction number. Debuted by American Express in 2000, this single-use number can be assigned to a credit card customer and used to make a transaction online [source: Lindsey]. Bank of America, City Bank and Discover offer similar services [source: Goldwasser].


If your card issuer doesn't offer disposable numbers, consider an alternative payment service like Bill Me Later or eBillMe. For example, eBillMe requires only an e-mail address to activate and allows shoppers to peruse more than 800 stores linked through the company's shopping portal. Users select the eBillMe option during checkout, then log on to their personal bank account to complete payment. The service offers protections similar to those of credit card issuers [source: Huddleston].

Known as "online wallets," PayPal or Google Checkout allow you to make payments or purchases online without revealing credit card or bank account information. Neither offers a full range of online banking services, but both are relatively easy to set up and use. Google Checkout and PayPal both have limited safeguards, but include the ability to dispute a questionable charge. A comparable service from, known as the Amazon Flexible Payment System, is in its final stages.

While fears about fraud and theft are a reality for many, a few precautions can make paying bills online a convenient and organized way to keep personal finances on track.

For more information on online bill payment and other personal finance topics, visit the links on the following page.


Lots More Information

Related HowStuffWorks Articles

  • Barrett, Jennifer. "Credit and Debit Cards: What You Need to Know." New York Times. January 6, 2009.
  • Bell, Claes. "Five Ways Fear of the Web Costs You." August 2009.
  • "Benefits of Electronic Payment."
  • Goldwasser, Joan. "7 Steps to Worry-Free Online Shopping." Kiplinger's Personal Finance. November 14, 2008.
  • Federal Reserve System. "The 2007 Federal Reserve Payments Study." December 2007.
  • Huddleston, Cameron. "Shop Online…With Cash." Kiplinger Personal Finance. September 16, 2009.
  • Huddleston, Cameron. "Stay Safe, E-Pay." Kiplinger Personal Finance. December 3, 2003.
  • "How Can I Tell if a Web Page is Secure?"
  • Lindsey, Rebecca. "Disposable Credit Card Numbers." February 1, 2001.
  • Pay It Green Alliance. "Get The Facts."
  • "Safest Way to Pay." American Bar Association/