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MBNA’s Bill Pay Choice

By Jim Bruene on February 4, 2004 10:10 AM | Comments

The credit card giant offers online payment of outside bills even if the merchant payee does NOT accept credit cards.



MBNA ($142 billion, 40 million cardholders) offers something we’d been expecting for years, a bill payment program that draws payments from a credit card. The company even posts the transactions as cash equivalents, offering the same 15- to 45-day float afforded regular card purchases. However, bill payments do not earn points in MBNA’s reward programs. Furthermore, payees are limited to those that can be paid electronically by CheckFree, although that’s now covers 70% of the processor’s volume.

Consumer Benefits


  •       Added float, as one message board poster said, “why worry whether you get a few days float (from your bank), when MBNA provides a whole month”
  •       Convenience of tracking more expenditures through the card-management system.
  •       Ability to repay over time.
  •       Option of charging bills to an MBNA card or debiting from any checking account.
  •       Free, so long as the cardholder initiates at least two payments per month from their card account (see fee schedule opposite)


  •       No real drawbacks, except for the confusing price schedule. Consumer advocates might argue that it encourages cardholders to take on more debt, but they could already do that by paying bills with convenience checks.

Financial Institution Business Case

We’ve long maintained that loan generation is the most important institutional benefit of online bill payment because. Why? If given the opportunity, users will likely charge several bills per year to an integrated credit line .

While you will lose money on convenience users who repay the charges each month, revolving balances should more than compensate. For example, in our back-of-the-envelope calculations, we estimate a total net profit of $60 per year per user of credit card bill-pay, or $600,000 annually across a 10,000-user customer base. 

The Most Confusing Fee Schedule in the World:
MBNA’s Bill Pay Choice may be among the most flexible online, but its fee schedule is utterly confusing. Perhaps the company should consider charging a nominal flat fee that’s waived if charging 2 or more bills.


Of course, any new credit card program must be monitored closely for abuse, both outright fraud, by setting up a phony electronic merchant, and less sinister gaming of the system where a user becomes an electronic merchant on CheckFree’s system and pays himself each month to earn the float. However, since no reward points are awarded, there is far less incentive to play games.

Card issuers could limit their exposure by setting a maximum monthly amount of bill payments, especially for new cardholders.

How it Works

MBNA cardholders must first register for online access at MBNA’s NetAccess www.mbnanetaccess.com  After that, they register for Bill Pay Choice. Users can pay bills either by charging to their MBNA card or debiting any U.S. checking account. MBNA does not offer its own checking account; however, payments can be drawn from MBNA’s money market account.

The service is free unless the user pays bills only from their checking account, in which case the fee is $0.75 per transaction. Users may qualify for unlimited free checking-account bill payments provided they charge at least two bills to their card each month.


Table 13
Mini Business Case: Card-based bill payment

monthly benefit, assuming 6 payments totaling $1000





Direct Costs  


Cost of float 30 days at 2%


Cost of transactions 6/mo to CheckFree


Cost of service/mo internal


  Total cost/mo  


Direct Revenues  


Increased outstanding balances $167 x 12 months
x 5% spread*


Fees from DDA trans  


  Total revenue/mo  


Net profit/mo  






Extra interchange from increased charge volume 1% x $300/yr


Increased retention 2% increase x $150/yr


Total per user
   per 10,000 users



Source: Online Banking Report estimates, +/- 33%, 2/04
Revenue assumptions: 1 out of every 10 bills will be revolved (10%); revolving balances will be repaid in equal installments over 12 months (6 months average life); interest rate spread = 5% (net of charge-offs)


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