hidden fees up 37 percent

By Jeff Domansky

US households spent more than $4.4 trillion on household bill payments in 2020. Unfortunately, the hidden costs with paying bills soared 37.6% to $119 billion from $74 billion in 2020.

hidden credit costs

That cost the average US household $925 in additional hidden costs compared with $577 in 2020.

The latest doxoINSIGHTS report – The Hidden Costs of Bill Pay 2021 – showed the steep increase in hidden fees due mainly to dramatic growth in the gap in APR rates between people with high and low credit scores and the impact of higher unemployment due to the Covid-19 pandemic.

Jim Kreyenhagen, doxo’s VP of Marketing and Consumer Service said, “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.”

The biggest hidden fee was a substantial increase in credit costs of $684 per household, more than doubling compared to $301 in 2020 and totaling $88 billion. Interestingly, other 2021 hidden costs declined slightly, including late fees of $119 (vs $132 in 2020), overdraft fees of $97 ($117), and identity fraud to $26 ($27).

Kreyenhagen added these annual hidden costs could otherwise subsidize nine months of mobile phone bills for the average US household.

Hidden costs of bill payments rising

The hidden costs of paying bills hits households hard. 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 expenses alone. 

$15 billion late fees and penalties

Households paid $15 billion in late fees and penalties, adding up to an average of $119 per household. In addition, 38% of households reported paying either late fees or penalties.  

According to the report, “the average US 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.”

Overdraft fees cost every US household $97, totaling $12 billion in additional direct costs. An estimated 30% of US households paid overdraft fees.

Nearly 1.4 million identity fraud and account theft cases were reported in 2021, affecting 6% of US households. That cost consumers another $3.3 billion or an average of $26 per household, not including the time and cost of repairing any negative reputation impact of identity fraud.

Consumer concerns on the upswing

Consumers reported increased concerns about the growth in these hidden costs of bill pay. The biggest bill pay issues included:

consumer concerns
  • stolen payment information (84%), +35% from 2020
  • impact on credit score (84%), + 31%
  • identity fraud (83%), +38%
  • late fees (68%), +24%
  • and overdraft fees (60%), +21%.

Covid-19 cost consumers too

The negative impacts on credit grew during the pandemic. Americans filed more than 500,000 claims of credit fraud due to the effects of Covid 19.

While consumers paid less for transportation, work clothing, and other commuting costs, they also paid more for some work-at-home expenses. doxo research showed household expenses grew for utilities, cable and internet, and mobile phone services.

doxo report cover

There’s not much room for optimism that costs for paying household bills will decline anytime soon. With supply chains compromised, energy costs increasing, and an unpredictable economy, it’s likely consumers will see increased costs for bill payments in the near future.

The doxo report is based on anonymous data from the company’s six million customers and more than 100,000 unique billers, as well as information from the Federal Reserve, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC). More insights from the 2021 Hidden Costs of Bill Pay report are available here.

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