Each year U.S. households spend over $4.4 trillion – about one third of all consumer spending – on recurring bill payments. While staying on top of these bills is the single largest determinant for consumer financial health, given that the average household pays 10 bills each month, it is no surprise that managing household finances is the number one cause of stress for consumers. On top of the stress that comes from the act of paying bills, the hidden costs associated with bill pay cause further expense and angst for many consumers – identity theft, payment account fraud, late fees, overdraft fees, and detrimental credit impacts amount to $119 billion, or $925 per household annually.
Keeping up with bills can be a challenge, especially as the economy continues to recover from the COVID-19 pandemic. So with the new year approaching, now is the perfect time to set resolutions designed to help improve our financial health. With a fresh start on the horizon, here are some specific bill pay tips to help consumers set the right financial course for the new year:
Look for ways to save money on bills
In general, there are plenty of tools and tactics out there for negotiating better rates on household bills. For example, Utilities costs are a top area where people can look to save money. They can often also save money on their Cable & Internet or Mobile Phone packages. There are two main strategies for doing so: one, individuals can try negotiating with their current provider to lower their rate, or two, individuals can shop around for another provider. Often, competitor companies will offer better rates to new customers because they want to bring on new subscribers.
Also, in general, the best way for consumers to understand whether or not they are getting the best deal is to know how much they should or could be paying for their bills. With doxoINSIGHTS, we strive to make this information transparent by providing a database of national and regional averages across the most common household bill pay categories. This bill comparison database has detailed infographics for all 50 states, and more than 900 cities and towns across the country. If consumers are armed with hard data about how much their neighbors are paying, they will be much better equipped to negotiate, whether it is through using a bill negotiation tool or reaching out to engage with their providers directly.
Improve and maintain your credit score
Interest rates for loans offered to consumers with prime credit scores are lower than those offered to consumers with subprime or poor credit scores. In our recent Hidden Costs of Bill Pay report, doxo analysis quantified the specific interest rate impact of a 35 point improvement in credit score. We found that this 35-point improvement could save households an average of $684 a year when considering the three most common forms of consumer debt (mortgage, auto loan and credit cards). The average U.S. household carries over $92,000 in debt, so these lower interest rates have a significant snowballing impact.
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. Consumers should always strive to improve and/or maintain their credit score, and the new year presents us with an opportunity to reinforce this as a financial goal.
Keep an eye on your money
Making timely bill payments is a key way to avoid the hidden cost of late fees. Careful management of finances to ensure that enough funds are in one’s bank account before paying via debit card can also help consumers avoid overdraft fees. This type of precaution can also help individuals catch identity fraud in their account early, so that they can report it to their bank.
Keeping a vigilant eye on one’s finances can help protect you against overdraft fees by ensuring you have enough money in your account before making a payment. You can also set up alerts in your bank account that tell you when your funds dip below a certain level. Consumers can also try opting out of overdraft protection, which prevents your bank from paying your bills when you do not have enough money on hand to do so.
Subscribing to doxoPLUS, doxo’s subscription service, can offer consumers peace of mind when dealing with these types of hidden costs. For example, the subscription offers 5 key bill-pay protections to guard consumers’ financial health. This includes not only overdraft protection, but late-fee protection, and identity theft protection.
Organize how you pay your bills
For many, paying household bills is a messy and fragmented experience. The average household pays ten different bills per month, often time across multiple websites and with different payment instruments. The new year is often seen as a great time to organize one’s life – and the way in which we pay our bills should be a part of this process.
Consumers should consider a solution like doxo to help improve their bill pay process. doxo’s customer-centered bill pay experience is independent of any individual bank or biller, allowing users to benefit from the freedom to pay their bills with multiple payment accounts; manage all due dates in a single view; schedule automatic payments; check payment status with real-time tracking; on a mobile phone or any device that’s convenient. Paying bills should not make consumers feel stressed, but instead should make them feel satisfied and accomplished.
A new year, a new way to pay bills
Whether you are trying to pay off credit card debt, saving to buy a house, or just trying to build savings in the new year, keep these three things in mind: make sure the money you bring in is more than you spend, create a budget and stick to it, and finally, be diligent about how you pay your bills in order to keep unnecessary fees and stress at bay.