Personal Finance

Paper Cuts: More Firms Push Customers to Go Online

Asking your customers to go “green” by opting for online statements is no longer enough for many companies. Some are offering financial incentives to switch over, while others are charging those who insist on receiving a hard copy.

pile of bills

”Companies are really trying to cut expenses where possible,” said Kathy Hamburger, president and CEO of 3i Infotech North America and its subsidiary, Regulus Group, which manages paper and online billing and payments for large banking, credit card and health care companies.

The result is a major marketing push to move customers from paper to online.

Many companies are stressing that online statements are safer than their paper counterparts.

“Before, they used the green message on consumers to go online, be green and save trees. That was moving the needle a little,” says Josh Wendroff, director of marketing at 3i Infotech. “Now a lot of messaging is on security.”

For example the online banking site for Chase tells consumers to switch to paperless statements to “reduce the chance of a statement getting lost or stolen.”

Other companies are sending out both online and paper statements for new customers, than slowly weaning them from a hardcopy one.

In another tactic, companies like Chase, Citi and Wells Fargo have offered incentives, from sweepstakes to small credits to gift cards.

But the most severe change is charging consumers for a hardcopy statement.

World Financial Network National Bank, a subsidiary of Alliance Data , announced to its customers late last year that they would be charging a $1 monthly fee for paper statements starting at the end of January 2010. Online statements remain free.

The bank issues and manages about 90 different private label brands for popular retailers like Victoria’s Secret and other stores from its parent company Limited Brands ; Charming Shoppes which owns well-known stores like Fashion Bug; and Stage Stores which operates Peebles.

World Financial Network National Bank says the fee is a way to offset the costs of observing the Credit Card Reform Act (effective next month), which requires credit companies to include terms, conditions and other information with each statement.

The new requirements will mean larger sheets of paper (14 inches instead of 11 inches) and more ink, all of which costs money, says Shelley Whiddon, director of external communications at Alliance Data.

Additionally, the heavier credit card statements run the risk of increasing postage costs, says Wendroff.

Although Whiddon says it is difficult to calculate the extra cost, the new statements will "use about 30 percent more paper."

TD Ameritrade is another company that has decided to charge for statements. The brokerage began charging $2 for quarterly or monthly statements in May. Kristin Petrick, a company spokesperson, says the fee is a way to get customers to go paperless because it is better for the environment and safer than receiving statements in the mail.

Of course, charging for a statement fee can backfire.

“You have to be pretty confident with your customer satisfaction to go ahead and charge for something that you’ve given out for free previously,” says Wendroff.

T-Mobile, the wireless unit of Deutsche Telekom , learned that lesson the hard way. The company announced it would charge a $1.50 fee for paper statements last August. By September, T-Mobile decided to cancel the fee—even before it had actually gone into effect—because of a strong negative reaction from customers.

“We’ve decided to not charge our customers a paper bill fee for now,” T-Mobile said in a statement. “Instead, we'll be taking more time to determine the fairest way possible to encourage people to go paperless.”

Many customers are comfortable with paying bills online, but can't shake the habit of keeping a paper statement in their files, says Wendroff.

“It’s for a certain type of consumer," says Linda Sherry, national priorities director at Consumer Action, a non-profit education and advocacy organization. "There should always be an application process where people who don't have access to a computer can continue getting paper statements."

She adds that people who don't have computers or internet access at home would have to use a shared computer which opens then up to identity theft.

(Sherry, by the way, says employees at her organization were hit with a $2-monthly fee from TD Ameritrade, because Consumer Action uses the brokerage for employee retirement funds.)

"It can really backfire," Wendroff added about charging customers for paper statements.

"Either customer service lines will be lit up with calls," he says. "Or worse, they won't say anything and just close their accounts and leave."