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How does online banking work. Does my bank print a check and mail it to the payee?

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Or is money wired to the payee from my bank? Doesn't online banking cost the bank money? How come banks don't charge for this service. I'm not naive I know they pass on the cost to me but how?

Online banking is a bigger term than simply online bill pay. There are several ways your bank can pay your payee – one is that they simply mail a check. The other, if they do a lot of business with the payee, is to simply make an electronic payment (ACH) to your payee – usually places like your electric company. Another way, if the payee banks at the same bank, is to simply deposit money to the payee's account at the bank.

Any of these cost the bank no more than if you had written a paper check or had initiated an ACH/wire transfer and in some cases, costs them less.

Some banks offer these services for free, others don't. One of my banks charges me about $0.65 to send a check from the bank but doesn't charge me to electronically pay someone. Another of my banks charges nothing to send a check but they don't like doing an ACH so they charge me for that.

In the long run, nothing at a bank is free – it will be paid for somehow. Usually with banking fees.

3 Responses to “How does online banking work. Does my bank print a check and mail it to the payee?”

1. countryguyhfc Says:
   November 27th, 2008 at 2:13 am

   Wiring the money is cheaper and more practical than handling actual cash or checks, so it actually saves the bank money. Banks make money by taking the money you have deposited with them and lending it to other customers and charging them interest. The only fee I am charged by my bank is a $5 debit card fee once a year, and any interest I owe on my overdraft protection account which is seldom used.
   References :

2. CoachT Says:
   November 27th, 2008 at 2:47 am

   Online banking is a bigger term than simply online bill pay. There are several ways your bank can pay your payee – one is that they simply mail a check. The other, if they do a lot of business with the payee, is to simply make an electronic payment (ACH) to your payee – usually places like your electric company. Another way, if the payee banks at the same bank, is to simply deposit money to the payee's account at the bank.

   Any of these cost the bank no more than if you had written a paper check or had initiated an ACH/wire transfer and in some cases, costs them less.

   Some banks offer these services for free, others don't. One of my banks charges me about $0.65 to send a check from the bank but doesn't charge me to electronically pay someone. Another of my banks charges nothing to send a check but they don't like doing an ACH so they charge me for that.

   In the long run, nothing at a bank is free – it will be paid for somehow. Usually with banking fees.
   References :

3. Kaska Says:
   November 27th, 2008 at 2:54 am

   Are you talking about bill pay? Done thru your bank. Most of those transactions are electronically transferred which cost them nothing.

   If they don't have that creditors info on file they will send a check. yes this cost money but I bet it makes up a small portion of the transactions they process daily.
   References :

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