doxo, the innovative web and mobile bill pay service, today released its newest doxoINSIGHTS statistical report: The Hidden Costs of Bill Pay – 2021. Each year U.S. households spend over $4.4 trillion on household bills, and almost $3 trillion on the 10 most common recurring ones. Staying on top of these bills is the single largest determinant for consumer financial health. The hidden bill pay costs – obscured in identity fraud, late fees, overdraft fees, and detrimental credit impacts – amount to an additional $119 billion annually, averaging $925 per household.
These figures are considerably higher than they were for last year’s Hidden Costs of Bill Pay Report, which showed that the hidden costs of bill pay had an overall market impact of $74 billion, and an average annual cost per household of $577. The steep increase in the cost of hidden fees was due to a growth in the gap in APR rates between people with high and low credit scores. While the financial benefit of having a 35-point credit score bump was $301 in 2020, it rose to $684 in 2021.
In 2020, the difference in credit costs between prime and sub-prime credit scores increased substantially. This was most likely due to the higher unemployment rate and overall industry concern that those with low credit scores may not be able to service their debt. For example, the charge off rate for credit cards in 2020 climbed over 4%, the highest it has been in almost a decade. While the federal government substantially decreased interest rates in 2020 due to concerns over a sluggish economy, and the general credit industry responded with lower rates overall, the gap between the rates that a prime credit score received as compared to a sub-prime credit score widened in all 3 major lending categories: auto, mortgage, and credit card.
doxo’s report uncovers the concerns American consumers have about these hidden costs and quantifies the expense for the typical U.S. household.
Breaking down the $925 consumers pay in hidden costs associated with paying household bills
Analysis of consumer survey and statistical data shows the average U.S. household incurs $925 per year on additional hidden costs associated with bill payment, comprised of:
- $26 in Identity Fraud Costs: Total identity fraud costs climbed to $56B in 2020, though much of these expenses were absorbed by card issuers and merchants. Even so, the average household still incurs direct out of pocket losses of $26 each year to identity theft or payment account fraud, for a total of $3.3 billion – not accounting for the additional consumer time and expense required to repair identity. There were almost 1.4 million cases of identity fraud reported in 2020. The pandemic was a major driver of this wave: Americans have filed over half a million cases of COVID-19 fraud and counting.
- $97 in Overdraft Fees: The average overdraft fee was over $24 last year, and bill payments are the primary cause of bank overdrafts. Banks charged consumers over $12 billion in overdraft fees in 2020, or about $97 per household.
- $119 in Late Fees: Missing or paying a bill late often incurs late fees, and 38% of households reported incurring one or more late fees last year. This totaled over $15 billion in household expenses, or $119 per household.
- $684 in Added Costs of Credit: Staying current on bills and debt payments is a primary factor for strengthening credit. doxo analysis shows that staying ahead on payments and improving credit score by 35 points can save the average household $684 per year in interest expense. The average U.S. household carries over $92,000 in revolving debt – between mortgages, auto loans, and credit cards, primarily – so boosting credit and qualifying for lower interest rates significantly reduces expenses.
“doxo empowers consumers to achieve their financial goals while spending less time and effort managing their bills,” said Jim Kreyenhagen, doxo’s VP of Marketing and Consumer Services. “Hidden bill pay costs like identity fraud, detrimental credit impacts, late fees and overdraft fees are a major avoidable expense for many consumers. Using a bill pay manager like doxo can help people avoid incurring a per-household cost of $925 a year on average. This annual cost could otherwise subsidize 9 months of mobile phone bills for the average US household. Also, doxo’s premium service, doxoPLUS, adds additional benefits to protect consumers from these hidden costs like identity theft protection, credit score tracking, and a no late fee and no overdraft fee guarantee.”
High consumer concern about Identity Theft and Credit Impacts
Consumers are increasingly concerned about the variety of ways they get stuck with expenses when managing and paying their bills. doxo’s survey of active household bill payers shows:
- 84% are concerned about bill pay impacts on their credit score
- 83% worry about identity theft when managing online accounts
- 84% are concerned about having payment account information stolen
- 68% worry about incurring late fees and penalties
- 60% are anxious about overdrafts to their bank account when paying bills
doxoPLUS tackles the hidden costs of bill pay
doxo’s secure, all-in-one bill pay service facilitates secure payment to any biller, with any payment method, on any device – delivering payments from millions of paying users to tens of thousands of billers across the country. doxo users can now upgrade to doxoPLUS and receive five key Bill Pay Protections that directly address the hidden costs of bill pay: Private Pay™ Protection, Identity Theft Protection, Overdraft Protection, Credit Score Protection, and Late Fee Protection. Collectively, these protections reduce the hassle and anxieties of paying bills and improve household financial health.
doxoINSIGHTS leverages doxo’s unique, aggregate, anonymized bill pay data comprised of actual bill payment activity to confirmed household service providers across the country. doxo bill pay statistics bring together the broadest available data set for analyzing actual household payment activity, pulling from over 6 million paying consumers across all more than 30,000 US zip codes. doxo’s payment network covers over 100,000 billers in 45 different service categories and enables payments using bank accounts, credit cards or debit cards. This uniquely broad statistical foundation powers doxoINSIGHTS reports – uncovering key trends for household financial and bill payment behavior.
doxo provides simple, secure all-in-one bill payment to any biller, with any payment method, on any device. For consumers paying through a linked bank account on doxo, bank payments made on doxo are free. A doxoPLUS subscription adds five essential financial protections that boost household financial health. Through these services, doxo currently serves over six million paying users who can make payments to over 100,000 local and national businesses, making doxo the largest bill pay directory in the nation. Billers on the network get paid directly, fast and free – and consumers have complete bill pay independence over when and how they pay their bills. doxo expanded its user base by more than 70 percent in the past year and is expanding its team to further accelerate growth and change the bill pay landscape to focus on the customer. doxo investors include MDV, Sigma Partners, and Bezos Expeditions. doxo is based in Seattle, WA.