Managing household finances can be a difficult task, especially as our economy continues to recover from the Covid-19 pandemic. In fact, American households spend more than $4.4 trillion annually on recurring bill payments, and getting those bills under control is imperative to maintaining their financial health.
Another thing to watch out for is the costs associated with paying bills. These can include payment account fraud, identity theft, overdraft fees, late fees, and detrimental credit impacts of up to an average of $925 per household per year.
There are steps you can take to improve your financial health just in time for the new year. I reached out to Jim Kreyenhagen, vice president of marketing and consumer services at doxo, a bill payment service, to discuss the best ways to save on bills and even boost your credit score in 2022.
What are some ways to save money on bills?
One of the main areas where people can look to save money is utility costs. They can also often save money on their cable and internet or cell phone plans. There are two main strategies to achieve this: first, individuals can try to negotiate with their current provider to lower their rate, or second, shop around for another provider. Often, competing companies offer better rates to new customers because they want to attract new subscribers.
In general, the best way for consumers to know whether or not they are getting the best deal is to find out how much they should or could pay their bills. Consumers can browse our database of national and regional averages in the most common household bill payment categories. If consumers are armed with accurate data on how much their neighbors are paying, they will be much better equipped to negotiate, whether using a bill negotiation tool or contacting suppliers directly.
How could consumers improve and maintain their credit score?
In 2020, the difference in credit costs between prime and subprime credit scores has increased significantly. This was likely due to the higher unemployment rate and the overall industry concern that people with low credit scores might not be able to repay their debt. For example, the credit card charge rate in 2020 soared to more than 4%, the highest in nearly a decade.
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In our recent report on the hidden costs of paying bills, our analysis quantified the specific impact on interest rates of a 35-point improvement in credit rating. We found that this 35-point improvement could save households an average of $684 per year when considering the three most common forms of consumer debt (mortgage, car loan, and credit cards). The average American household has about $92,000 in debt, so these low interest rates have a significant snowball effect.
Consumers should always strive to improve and/or maintain their credit score, and the new year provides us with an opportunity to reinforce this 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 per month, often on multiple websites and with different payment instruments. Consumers should consider ways to improve their bill paying process. Consider a customer-centric bill payment experience independent of any bank or biller. This allows consumers to enjoy the freedom to pay their bills with multiple payment accounts; manage all due dates in one view; schedule automatic payments; check payment status with real-time tracking; on a mobile phone or other convenient device.
Making timely bill payments is a key way to avoid the hidden cost of late fees. Prudent financial management to ensure there are sufficient funds in their bank account before paying by debit card can also help consumers avoid overdraft fees.
Any last advice for the new year?
Whether you’re trying to pay off credit card debt, saving to buy a house, or just accumulating savings in the new year, keep these three things in mind: make sure the money you 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 to avoid unnecessary fees and stress.
Jeanette Pavini is an Emmy Award-winning journalist specializing in consumer information 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. His work includes reporting for CBS, MarketWatch, WSJ Sunday and USA Today. Jeanette has contributed to “The Today Show” and a variety of other media. You can follow his money saving tips and ways to give back on Facebook: Jeanette Pavini: Community The joy of $saving. Find links to his social media and his book at Jeanette Pavini.com.