FYI: Why do banks offer online billpay for free?
Did you ever wonder why banks let you use online billpay for free? After all, it’s not free for them – they pay companies like CheckFree and Metavante big bucks so they can offer you free online billpay services. Are you worth it? Clearly, the banking industry is convinced you are — almost all banks and credit unions provide free online billpay with all their checking accounts. Some banks even reward you to use it.
The simple answer is that bankers believe online billpay users remain customers for more years than customers who don’t use online billpay. And an extra year of your business is worth providing you with free online billpay.
Look at the math: Let’s estimate the average cost (to the bank) to offer you billpay at $0.50 per transaction and the average customer sends out 8 bills per month (I know this from banks). That means it costs the bank about $4 per month or $48 per year to offer you free online billpay. So if their assumption that you’ll stick around longer is correct, it’s totally worth offering online billpay for free. Why? The average checking account customer generates about $300 in revenue (fees, $ on your deposits, etc.) per year and new customers are expensive to acquire (~$200 per).
If you don’t want to be tied down to your bank or credit union, don’t use online billpay, set-up automatic payments or have any direct deposits. But if you’re like the rest of us, before you jump at the $100 offer, make sure the bank is convenient and that the checking account you’re opening includes all the features you’ll need.
You can check out FindABetterBank to compare features and fees for banks in your area.
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