The ins and outs of ePayments

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 require automatic deductions from a checking or credit card account. Utilities, mortgage lenders, insurance companies and others strongly encourage electronic payments. And many states now distribute benefits like unemployment, child support and disability assistance using prepaid cards instead of paper checks.

Electronic transactions have caught on because:

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. And they save millions of tons of paper.

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 sometimes forget to mail payments on time, auto payment protects against late fees and overdraft charges.

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 – for either for the full amount (usually mandatory with utilities), the minimum payment due, or an amount you choose. You can usually have funds drawn from either your checking or credit card account (be sure to ask).

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.
• 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).
• Review credit card and bank account statements regularly 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 www.AnnualCreditReport.com, or more frequently for a small fee from each bureau.
• Create complex, random passwords and change them regularly.

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.