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Reality Check: Third-Party Bill-Payment Services

Third-party bill-payment services allow you to pay all of your bills in one place. However, problems with setting up accounts and questions about security and transfer time make it clear that third-party bill-payment services, although desirable in theory, still are in their infancy. 

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For consumers who seek a unified solution to their bill-payment challenges, the good news and the bad news is that third-party bill-payment services are available.

However, although third-party bill-payment services deliver useful new features, we still found that no one service provides all of the features that consumers want—the ability to pay all billers, archive full versions of bills and manage personal finances. To accomplish that, you have to sign up with different services, which adds to the confusion, as well as the cost. (For a look at what each type of service provides, see “Keeping Track of Your Service,”)

With so many bill-payment services competing with banks for consumers’ business, we remain uncertain about whether these services help consumers to pay their bills without a lot of hassle. The burden is on the services to prove their capability to follow through on their promises and deliver solutions on which consumers can bank, say two financial analysts with whom we spoke. For now, third-party bill-payment services seem to have proven only that they aren’t quite ready for prime time.

PAPERLESS TRAIL. U.S. consumers pay an average of 30.1 billion bills per year, according to Western Union. Of those payments, nearly half, or 14.5 billion as of July 2012, were made through a website or via mobile devices. Javelin Strategy & Research says 81 percent of consumers perform some type of bill payment or personal-finance management online.

The promise of third-party bill-payment services is that you can cut ties to banks and their often onerous charges of, well, everything, says Gwenn Bézard, who is an analyst with Aite Group. However, one thing for which banks typically don’t charge you is to use their online bill-payment service.

For typically either a monthly fee of less than $10 or a per-bill charge, third-party bill-payment services access your bank or, in some cases, your credit-card account, so you can pay your bills. (For a survey of specific fees, see "Features of Third-Party Bill-Payment Services.") In the past 2 years, third-party bill-payment services introduced free mobile applications that allow you to access the services while on the go.

Sadly, despite the fee that third-party bill-payment services charge, they aren’t as easy to set up and use as are those of their bank counterparts. We found through our hands-on experience that third-party bill-payment services require the input of information that’s a time-consuming process to complete. Most third-party bill-payment services require additional steps that bank bill-payment services don’t, such as prepregistering with the biller.

In fact, setup can take hours and be particularly daunting if you have 20 bills that you pay on a regular basis. The good news is that you have to enter all of your information, including your bank account or a credit card as the source for payment, only once when you set up your account.

The bill-payment process itself is simple: You just set up a recurring payment or enter the amount of the bill every month and the date that you want it paid. The time to get a bill paid depends on the service. In most cases, processing takes 2 business days for billers who agree to connect electronically with the third-party bill-payment service. However, if billers don’t agree to connect electronically, the third-party bill-payment service must send a check to the biller, which can take as long as a week.

Unfortunately, some third-party bill-payment services lack the capability to pay all of your bills. This holds true particularly when it comes to paying bills to smaller businesses, such as a landscaper or a plumber, that aren’t signed up to accept bill payments through the third-party system.

Instead, you’ll have to use your bank or write a check to cover those bills. So much for convenience.

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