Hidden Costs You’re Probably Paying For - And How To Stop

With the cost of living seemingly always on the rise, keeping track of your monthly budget is a necessity!

But what happens when you find additional or unexpected costs that are eating away at your hard-earned money?

The best way to regain control of your finances is to avoid hidden costs. Although it may seem like a challenge, identifying and eliminating hidden fees is easier than you may think, especially when using our handy guide on how to stop unnecessary overspending.

Common Hidden Costs And Where They Lurk

If you’re curious to know where your money is going every month, you’ll need to pay close attention to where your hidden costs are coming from.

Of course, they wouldn’t be considered ‘hidden costs’ if they were obvious drains on your wallet. So, to help you understand where to start, we’ve compiled a list of the most common hidden costs and where you can find them.

1. Subscription Services

Subscription services have become a big part of our everyday lives. From streaming platforms to monthly boxes for everything from snacks to beauty products, these services have the power to make our lives more convenient.

However, these seemingly small subscription fees can add up quickly. Eventually, they silently start to drain our finances and leave us wondering why our monthly expenses are so high.

Arguably the worst part about subscription services is that most of us tend to forget about them. This is especially true when they’re auto-renewed annually or hidden behind automatic payments.

Solution

If you’re not regularly using the services you’re subscribed to (or they’re an unnecessary expense), then it may be time for a review. For instance, services like Spotify, Netflix, and gym memberships are some of the most common subscriptions for most households.

Although you may enjoy the idea of having access to everything these subscriptions have to offer, if you’re not using them as much as you’d thought, you’re just throwing money away! So, instead of losing money, why not use a service like Emma to track your spending and eliminate any unnecessary subscriptions as quickly as possible?

For more tips on ways you can reduce your spending on subscirptions, check out our full savings guide for our expert advice.

2. Energy Tariffs

When your energy deal for a fixed tariff expires, most energy providers automatically switch you to a Standard Variable Tariff (SVT). And this may have happened without you even realizing it, adding to your unexpected costs every month.

The problem with these SVTs is that they’re usually way more expensive than fixed-rate plans. And when you don’t notice that you’ve made the switch, it can end up costing you hundreds of pounds a year!

The reason that so many customers end up on an SVT rate is that it’s typically the default option after your initial contract ends. That means you may pay extra without actively choosing to. In turn, staying on a high-cost tariff can quietly eat away at your budget and leave you paying for energy at prices much higher than you’d be paying elsewhere.

Solution

If your fixed-rate deal has ended, don’t feel obligated to stay with the same supplier. Instead, shop around to find better deals and tariffs that can help you save. There are also plenty of comparison sites like Uswitch and Switchcraft that make it incredibly simple to compare energy rates across multiple providers. That way, you can be sure you’re getting the best deal and keeping your costs as low as possible.

3. Bank Fees

Did you know that there are tonnes of costs involved when you’re dealing with your bank? That’s right, many banks often hit you with fees that can add up pretty quickly if you’re not paying attention.

Whether it’s for general service fees, overdrafts, processing fees, or even charges to withdraw cash when you’re travelling, these are 100% avoidable with a little planning. And remember, even though individual charges may not seem like much, having other fees can silently chip away at your budget if you’re regularly incurring them.

For instance, if you frequently withdraw cash abroad, the extra fees at the ATM may not seem like much at first. However, if you travel often, these additional costs could add up to a significant amount of money.

Solution

Fortunately, you can eliminate these hidden charges by switching banks. Plenty of newer banks offer online accounts with smaller bank fees. For example, Starling Bank and Monzo offer free bank accounts and other important perks (such as no-fee currency exchanges).

4. Unused Direct Debits

Have you ever found yourself paying for something that you don’t remember signing up for? Then you’re not alone.

You may have a gym membership that you don’t use or a subscription to magazines you haven’t read in months. That’s exactly what happened to working mum Sarah, who saved more than £80 a month by eliminating these two expenses.

Alternatively, you may have signed up for add-on services for an older smartphone, such as insurance or a family plan you no longer need. Either way, these charges start to add up in a big way.

Solution

If you think you may have additional payments coming off your debit card, it’s best to check your online banking statements. When you spot outgoing payments for things you don’t need anymore, it’s time to cancel these payments and save that extra cash to cover your essentials. The faster you can stop these payments, the faster your budget can recover.

5. Insurance Overpayments

Insurance premiums are one of the easiest fees to overlook since plenty of people set their policies to auto-renew. When you opt for an automatic renewal, you may not be aware of any changes to your policy – including the cost.

Solution

To avoid falling into the trap of overpaying for insurance, it’s a good idea to check your annual renewal notices. Be sure to read over these notices and their terms and conditions carefully (and don’t forget the fine print!).

On the other hand, you can always use comparison sites like Compare the Market or MoneySuperMarket to find the best deals. Since insurance prices can fluctuate quite a bit, the best plan of action is to shop around for the most affordable option.

Of course, if you’re happy with your current insurance provider but have found a cheaper deal elsewhere, give your current provider a call! Plenty of companies will match their competitors’ prices or offer discounts on your current policies.

How To Identify And Address Hidden Costs

Hidden costs can slip into our finances unnoticed and slowly eat away at our hard-earned money and savings. And before you know it, your budget could be looking a little thin.

Fortunately, there are easy ways to address these sneaky fees and reduce your spending – especially in unnecessary areas of your life.

1. Conduct a Financial Audit

One of the easiest ways to identify any hidden fees is to take a good look at your finances. That means going through your bank statements and credit card bills to see where your money is going.

As you’re evaluating your spending, pay extra attention to recurring charges (especially ones you may have forgotten about). You may even find extra fees like late charges or premium rates you didn’t realise were adding up.

By organising your spending, you’ll be able to see where you can cut back and make smarter spending decisions. Plus, you’ll have a much clearer picture of your money habits.

2. Automate Tracking with Technology

Tracking your spending doesn’t have to be a chore. In fact, technology can make it incredibly easy!

For example, platforms like Emma automatically link to your bank accounts, credit cards, and even your investments to give you an overview of your spending habits. And the best part? It’s all in one convenient place.

Spending apps can also categorise your transactions into easy groupings, send you alerts on your spending, help you spot any unnecessary costs, and much, much more.

Certain banks also offer built-in budgeting tools that link to your online banking and help you track your activity. Depending on the bank you’re with, you may also have access to alerts for any unusual activity, which makes it easy to stay on top of your finances.

3. Negotiate Your Bills

Did you know that you can negotiate the final price of your bills to help you save money? Many people don’t realise that specific service providers, like your internet or phone companies, are open to discussing your fees.

Once you’ve found recurring costs in your budget, you may want to do a ‘comparison shop’ to see what kind of rates other companies are offering. Of course, in some cases, it may be cheaper to switch providers. But if you want to stay with your current provider, take a few minutes to call them up and ask if they can offer you a better deal.

A great example of this is the case of John – a 35-year-old from Manchester. As soon as he realised he was overpaying for his energy tariff, he called his energy provider and switched to a fixed-rate tariff. Just by making this small switch, he was able to save himself around £100 a year.

4. Check the Small Print

Before you sign up for any new services or subscriptions, always take a closer look at the fine print. This is where hidden fees, like sneaky price hikes or penalty fees for things like early termination, come in.

For example, some subscription deals may offer a great price for the first few months and then increase after a certain time period. In other cases, certain services may charge extra for things like delivery or support.

Luckily, when you read the terms and conditions carefully, you can avoid these unexpected charges that may pop up later. Or, at least, you’ll be better prepared for the price changes!

Quick Wins To Eliminate Hidden Costs

If you’re ready to take complete control of your finances – and quickly – then making some small adjustments can have a big impact.

Here are some ways to secure quick financial wins and make a noticeable difference to your budget:

1. Cancel and Consolidate

A simple way to reduce hidden fees is to cancel any services or subscriptions you don’t need. We’ve already touched on ways to do this, but there is another option if you can’t find any expenses you can cut: Consolidation.

Consolidating your bills isn’t as tricky as it may seem. For example, if you’re paying for multiple data plans, why not switch to a more comprehensive bundle deal? There are tonnes of family plans and multi-mobile deals you can take advantage of (depending on which provider you’re with). And, if you need some help, you can always speak to a service agent to guide you through the process.

Not only can consolidating your bills reduce costs, but it can also reduce the hassle of paying multiple bills. In turn, it’s easier to budget for expenses and will ensure that you’re paying the best prices for things that you actually use.

2. Opt for Pay-As-You-Go Plans

Paying for services on a pay-as-you-go basis can be a great way to avoid any nasty surprises on your monthly bills. Using the same example of mobile phone contracts, you may find that you’re paying for more data or minutes than you use. So, instead of paying set monthly costs, you can opt for a pay-as-you-go plan, where you only pay for what you’ve used.

Choosing this type of payment option can help you avoid paying for unused services and give you more control over your spending. And the same goes for things like TV packages! There are several providers that offer deals where you only pay for access to certain channels that you enjoy.

3. Switch to Annual Payments

In some cases, paying for certain services is unavoidable. But that doesn’t mean that you can’t still cut your costs. For instance, switching to an annual subscription rather than paying monthly can help you to save loads of money.

When you pay for the year in advance, providers will often offer you a much lower price than when you pay monthly. In fact, some services may offer you a month free when you sign up for a year.

Although the upfront cost may feel higher, this method will help you save money in the long run by avoiding extra processing fees or higher monthly rates. You can even avoid cost fluctuations since your service will be a once-off payment for a set period.

4. Use Cashback Sites

A great way to stick to your budget (and be rewarded) is to recoup some of your spending through cashback apps and sites. Sites like Quidco and TopCashback offer cashback on a variety of purchases, including on platforms like Amazon and popular subscriptions like Hello Fresh.

By simply signing up and clicking through to your favourite retailers or service providers, you can earn a percentage of your purchase back.

The Long-Term Benefits Of Cutting Hidden Costs

Reducing your hidden costs doesn’t just bring you immediate savings; it can also bring you long-lasting advantages! Here’s how trimming your spending can benefit you in the long run:

• Financial freedom: With fewer unnecessary expenses and unexpected costs eating away at your budget, you can redirect your savings toward more meaningful goals.
• Peace of mind: When you remove hidden costs from your budget, you can eliminate the constant worry about money slipping through the cracks. In turn, knowing where your money is going can give you peace of mind and result in less financial stress.
• Sustainability: By making more mindful choices about where your money goes (such as investments or paying off debts), you can use your financial and environmental resources more efficiently.

If you want to take control of your finances today and work towards total financial freedom, then it’s time to start implementing our handy money-saving techniques. Just by eliminating hidden fees, you can save hundreds of pounds a month and make your money work for you.

FAQs

How can you avoid hidden fees?

The easiest way to avoid hidden costs is to monitor your spending every month. Check your bank statements and pay close attention to recurring fees.

What is an example of a hidden cost?

A great example of a hidden cost is a change in price for a service or subscription that automatically renews. For instance, your Spotify account may be billed monthly continuously. So, unless you stop the subscription, the charge will keep coming from your account. However, this also means that you may not notice if your monthly charge increases slightly.