9 Costly Bill-Paying Mistakes To Avoid
This article originally appeared on GOBankingRates.com
Author: Jenny Rose Spaudo
Americans are feeling the pressure of rising household expenses. As many as 86% of American adults are worried that inflation will affect their financial health this year, and 73% are concerned about their ability to pay their regular bills, according to a 2023 doxo INSIGHTS report.
But inflation isn’t the only reason some people’s bills are so high. GOBankingRates spoke with two financial experts to uncover mistakes that may be increasing your monthly expenses.
Not Paying Bills on Time
Do you ever forget when certain bills are due? Late payments can result in fines that quickly add up. In fact, a 2022 LendingTree survey found that 61% of people who had to pay late fees couldn’t afford to cover the cost.
“Each time you pay a late fee, you give away money,” said Jay Zigmont, CFP and founder of Childfree Wealth. “Get on a budget and automate your minimum monthly payments to avoid late fees. You may want to open a separate checking account for your regular monthly bills, split your paycheck to cover them and then put everything on auto-draft.”
Not Looking Over Monthly Bank Statements
The Federal Trade Commission received around 390,000 complaints of credit card fraud in 2021. Since credit card theft is so common, Kimberly Loftis, a CPA and the president and CFO of Loftis Consulting, recommends checking your card and bank statements for unauthorized charges every month.
You should also look for automated charges you no longer need or have forgotten about. Sometimes signing up for a free trial can lead to unexpected charges once the trial ends.
Not Using Budget Billing
If you regularly pay your bills on time, some utility companies will allow you to even out your monthly payments with budget billing. This can help you avoid sudden spikes in your monthly payments — such as an abnormally high electric bill during an especially hot or cold month.
Once your utilities are on budget billing, consider also putting them on auto-draft, recommended Zigmont.
Not Reviewing Medical Bills
Before paying any medical bills, be sure to thoroughly look through the statement and make sure your insurance company has already paid its part.
“Many billing companies will bill both the patient and the insurance company simultaneously, even if you’re only responsible for a copay,” said Zigmont. “If you have large medical bills, check with the hospital’s office of financial aid or charity care to see if they can help.”
Staying With the Same Provider Because It’s Easier
When was the last time you shopped around for better rates and deals? Loftis recommends doing so at least annually. Compare your current internet, cable and mobile phone plans to similar ones from other providers to find the best deal. You can also reach out to your insurance agent to see if they can find more affordable policies with the same amount of coverage.
Waiting Too Long To Pay off Your Credit Cards
Credit cards can help in a pinch, but if you don’t pay them off in time, you can end up spending much more on interest.
“Many credit cards have 20% interest, with some as high as 30%,” said Zigmont. “If you owe $10,000 on your credit cards, that means you’re paying $2,000 to $3,000 in interest payments alone each year.”
Instead of making the minimum monthly payments, try to pay off high-interest credit card debt as soon as possible, he advised.
Not Canceling Your PMI Once Your Equity Reaches 20%
Many conventional loans require you to pay private mortgage insurance (PMI) if your down payment is less than 20%. Depending on your loan amount, a PMI premium can increase your monthly mortgage payments by a few hundred dollars. Once your home equity reaches 20%, though, you can cancel this monthly fee.
However, “the mortgage servicer is not required to automatically terminate PMI until [your principal balance] reaches 78%,” said Loftis. So be sure to reach out to your lender as soon as your principal balance reaches 80%.
Choosing the Wrong Plan for Your Needs
Take a look at how much you’re using your phone, internet and streaming services. Does your plan match your needs?
“If the plan selected is underutilized, you’re overpaying,” said Loftis. “If the plan chosen is overutilized, then you’re paying for overage fees.”
Not Reading the Fine Print
“Before signing any contract, make sure to review the fine print for any hidden fees,” said Loftis.
An agreement’s terms and conditions may not be an exciting read, but checking them can help you avoid unexpected fines and charges. Follow this practice before signing up for a new service, taking out a loan or opening a new credit card or bank account.