Managing household finances can be a challenging feat, especially as our economy continues to recover from the Covid-19 pandemic. In fact, U.S. households spend over $4.4 trillion on recurring bill payments every year, and staying on top of these bills is imperative to maintaining financial health.
Another thing to stay on top of is any costs associated with bill pay. These can include payment account fraud, identity theft, overdraft fees, late fees, and detrimental credit impacts that can average as much as $925 per household a year.
There are steps you can take toward improving your financial health just in time for the new year. I connected with Jim Kreyenhagen, the vice president of marketing and consumer services at doxo, a bill pay service, to discuss the best ways you can save on bills and even boost your credit score in 2022.
What are some ways you can save money on bills?Utility costs are a top area where people can look to save money. They can often also save money on their cable and 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, shop around for another provider. Often, competitor companies will offer better rates to new customers because they want to bring on new subscribers.
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. Consumers can check our database of national and regional averages across the most common household bill pay categories. 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 providers directly.
How might consumers improve and maintain their credit score?In 2020, the difference in credit costs between prime and subprime 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 during 2020 climbed to over 4%, the highest in almost a decade.
In our recent Hidden Costs of Bill Pay report, our 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 about $92,000 in debt, so these low interest rates have a significant snowballing impact.
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.
What are the best strategies for organizing and managing your bills?For many, paying household bills is a messy and fragmented experience. The average household pays 10 different bills a month, often across multiple websites and with different payment instruments. Consumers should consider ways to help improve their bill pay process. Consider a customer-centered bill pay experience that is independent of any bank or biller. This allows consumers 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.
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.
Any last tips for the new year?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 spent, 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.
Jeanette Pavini is an Emmy Award winning journalist specializing in consumer news and protection. She is the author of “The Joy of $aving: Money Lessons I Learned From My Italian-American Father & 20 Years as a Consumer Reporter.” Jeanette is a regular contributor to TheStreet. Her work includes reporting for CBS, MarketWatch, WSJ Sunday, and USA Today. Jeanette has contributed to “The Today Show” and a variety of other media outlets. You can follow her money saving tips and ways to give back on Facebook: Jeanette Pavini: The Joy of $aving Community. Find links to her social media and her book at JeanettePavini.com.