You haven't seen a bank teller since you got an ATM card. You haven't read your monthly bank statement since you got online banking. But you're still buying stamps, licking envelopes and writing checks to pay your bills.

The banking industry - and others - want to change that.
Banks, financial institutions, the U.S. Postal Service and even Web sites such as MSN and Yahoo! are heavily promoting online bill paying because they see it as a way to make money. Most charge fees, usually $5 to $6 a month, for online bill-paying service. Others have promotions that let customers try it for free for three to six months. Some banks and financial institutions offer free online bill paying as a reward to customers with high balances. But, increasingly, banks are offering bill paying for free to all of their customers based on research that shows those who pay their bills online are more loyal, and more profitable, customers. Citibank and Chase Manhattan Bank, eTrade bank, American Express Centurion Bank and San Diego-based Bank of Internet USA are among those that have offered their customers free online bill paying.

Bank of America joined them in May, waiving its $5.95 monthly bill-paying fee for its customers. Industry experts expect other banks to follow suit. Bank of America found that customers who pay their bills online through the bank's Web site are less likely to go to another bank, and they make 30 percent fewer calls to the bank.

What's more, they have 38 percent higher deposit balances than other customers and 45 percent higher loan balances. That means more revenues for the bank. "It's a valuable customer base for us," said bank spokeswoman Betty Riess. "Free bill paying is a way to reward and recognize this customer group."

Another way online bill paying can save banks money: It costs between $1 and $5 to process a check while an electronic payment averages less than $1 to process. "I can't remember when I haven't paid my bills online," said Nancy Loncarich, a Bank of America customer who lives near Houston but still uses the same account she had when she lived in San Diego. "I pay almost everything online: my mortgage, the cable bill, the telephone bill," Loncarich said. "I write only about four checks a month." Like Loncarich, many online bill payers get hooked on the convenience of it. "Once people gather the courage to try it, they usually go, 'Wow,' " said Gary Lewis Evans, president and CEO of Bank of Internet USA. "Once they do it, I don't think they'll ever go back. Only about 1 percent of those who try it (at Bank of Internet) quit using it." Three out of four Bank of Internet customers use its free online bill-paying service. That high rate is likely because it is an online bank, and all of its customers do their banking on the Internet.

Nationwide, nearly 8 million people pay their bills via a bank Web site, according to Gomez Inc., a research firm covering online financial services. Even so, online bill paying is getting what the Federal Reserve Bank of New York describes as "a cool reception." In a study published in August, the bank found that electronic bill payment "has not found favor with potential users" and has fallen "far short of initial projections."

Not for everyone
A majority of Americans continue to use that tried-and-true method of paying bills: snail mail.

Some customers say the fees that banks charge for online bill paying keep them from using the service. Others fear for the security of their payments despite assurances from the industry that online payments are safe. The biggest reason most people continue making runs to the mailbox is that they do not see the need to change. "First of all, everyone's got a pretty good idea how long it'll take for the payment to arrive because they've been sending stuff through the mail for years," said Chris Musto, vice president of research for Gomez Inc. "And the second thing is, habits are hard to break." Still, the number of online bill payers is growing by leaps and bounds. Between the beginning of this year and July, the number of Bank of America customers paying their bills online increased 50 percent. By its most recent estimates, Bank of America processes 7.6 million bills a month for its 1.4 million active online bill payers.

Last March, Microsoft Corp. announced that the number of online bill payers at its CNBC on MSN Money Web sites had more than doubled in the past year. Even so, Musto said, the number of people paying online bills through their banks dwarfs the number of people paying through other Web sites. Even the banks, though, fall short when it comes to paying credit card bills, Musto said. His research found that people are more likely to pay credit card bills at the credit card company's Web site because they want immediate reassurance that the payment went through.

The divide between online bill payers and paper bill payers will continue, probably for years. "It's going to be a while before the majority of bills are paid online," Musto said.

One way banks are trying to encourage customers to pay online is by taking the next step in online bill payment: getting your bills online. It allows customers to go to one central site to check all their billing statements. Some banks even go as far as to e-mail customers when bills have arrived.

Making The Numbers Work

• Customers go to a designated Web site, set up a user name and password, then create a list of everyone they want to pay, along with addresses and account numbers. This information needs to be entered only once.
• Creditors that are unable to accept electronic payments are sent checks through the mail by the bank.
• Customers then can schedule payments for bills of fixed amounts that occur regularly. Bills whose amounts vary can be entered as they are received.
• Customers can schedule payments to be made days or weeks later.
• Payments should be made at least five days before they are due.
• Some credit card companies, cable TV providers and other companies also offer the ability to pay their bills at their Web sites.