Monday, April 19, 2004

Why Are Online Credit Card Payments So Slow? A reader and retired IT manager has been contemplating the online payment terms for various credit cards. And it's led him to ask an interesting question: why do the time and cost savings from online payments seem to only benefit the credit card company and not the consumer? The reader writes: Electronic remittance - online payment -- of recurring bills like credit cards was supposed to be easy and fast for the consumer. Instead it has become an easy and fast way for some credit card companies to make a buck at the consumer's expense. Overloaded with a maze of non-standard service agreements, online remittance is fraught with traps to extort additional fees from unaware consumers. Having worked part of my career in a remittance processing center, I know all to well the savings big companies enjoy when people pay their bills electronically online, rather than via the mail. To process mail payments takes expensive manpower, time, and equipment, plus lots of paper. They have to open the mail; remove and manually sort the payment stubs and checks (plus any non payment items included in the envelope); micro-encode each check; resolve errors; electronically process the checks and the payment stubs so accounts receivable is updated along with each individual payee account; and bundle the checks for deposit and prepare/record the deposit paperwork. With online remittance all that is eliminated, saving companies millions in manpower and equipment costs, plus the funds get into company's coffers faster. So why aren't these saving passed on to us consumers who pay on line? Why is there so much inconsistency as to when your online payment will be applied? And why do most credit cards companies take two or three days to credit your online, supposedly lightening fast, payment? The computers at the Fed, at banking and financial institutions, and credit card companies run 24/7. They are not about to let billions of dollars sit idle anywhere in the pipe. You would think electronic fund transfer would be fast but each credit card company has its own unique service agreements as to when your online payment will be credited to your account. Some credit card companies specify two business days, others three business days. Why that's about the same amount of time to get the payment to them the old fashioned way - via the post office. And what one credit card considers a business day, another may not. Most do not count holidays as business days, but this too can vary. Daily online submission cutoff times vary from early in the afternoon to late at night and may vary by time zone. So if your credit card bill is due on a Monday, and you pay it online the previous Friday evening, you will get hit with a late charge. For example, GM Master card advises your online payment should be submitted at least two business days prior to the due date. If you discover you missed it, they will gladly take your payment over the phone -- for a $15 fee! How convenient. Fleet does not specify a daily cutoff time, but says "once you initiate a payment, it immediately begins to be processed and it cannot be stopped, deleted or changed." But they state it takes three business days to get to them. However, if you want your payment to be effective immediately, they say "We may charge you a fee if you request that your payment be applied to your Card immediately rather than three business days from today." Makes you wonder why your electronic payment, "that immediately begins to be processed" takes three days to crawl through the electronic pipe and no days with a phone call. Only one credit card company I know of does it right - American Express Blue. No gimmicks, no games, no fine print, they state simply "Payments are noted on your account immediately." Doesn't matter if it's a holiday, Christmas or 3 AM in the morning. So I only use the others where Amex isn't accepted. And the reason Amex is doing it right might just be because of a proposed class action settlement (Christopher Boehr vs. American Express Centurion Bank) regarding late charges for payments received after noon or on weekends or holidays and not credited to the next business day. As much as I hate to see more bureaucratic/government intervention, this industry is crying out for it. 12:13:20 AM    comment []