Americans, as a whole, are not very good at managing their finances. And it seems the biggest challenge — for those of us not among the country’s wealthiest citizens, anyway — is paying our bills.
There’s a number of problems surrounding our bill-paying habits, including not paying the bills on time, incurring late fees, letting some bills fall through the cracks (because there are simply too many to manage), and not having enough money to cover some payments when they’re processed through our checking accounts, thus incurring overdraft fees.
Recent research by Aite Group shows consumers pay roughly $4 trillion worth of bills each year. The majority of households pay 11 to 15 bills each month, according to the same research. That’s up to one bill every other day.
What’s more, consumers pay an average of $23 billion in late fees each year, according to The Wall Street Journal.
So how do we pay less in wasted fees and get better at managing our finances?
A variety of apps have sprung up to help rescue Americans from such money and bill-paying woes. And those in the tech industry say the apps detailed below are just the beginning, that they are the wave of the future when it comes to banking, finances, and how we will all manage our cash in the future.
“We’ve seen major overhauls in transportation thanks to Uber and in the communication arena because of Facebook, and banking is really that last big area,” says Prism’s Rachel Santee.
“It’s really the way the world is going. Every major bank, even smaller ones, has their own app. And people, particularly among the millennial generation, are used to doing everything at their fingertips.”
With that in mind, here’s a look at a few of the bill management and money management apps on the market.
Originally launched in 2012, Prism just made its Android version available in January 2014.
Prism allows you to put all your bills in one app, and then review, manage, and pay them any time, anywhere, from your phone, for free.
Here’s how it works: After downloading the app, you add all of your billers and then the app finds all of your current bills and recent payments. After that initial setup, you can pay bills right from the app.
The app, meanwhile, will do things like remind you when bills are due and check to make sure you have enough money in your account to cover the bill.
“We believe we can solve the late and overdraft fee problem,” says Santee. “We can help consumers avoid these fees. We are completely consumer-focused and want to see our customers succeed financially.”
Some of the other highlights of using Prism include that it allows you to make same-day or instantaneous payments, which some competitors, such as Mint Bills, are not set up to do.
“The biggest different between us and Mint Bills is they use a third-party payment processor. When you pay bills through their app, the payment is not instantaneous. It takes two to three days for payment to be processed,” says Santee. “We don’t use a third-party processor. So when you pay a bill, the payment posts immediately. There is no two- to three-day waiting period.”
To date, Prism has about 122,000 users and adds about 8,000 new accounts each month.
Meanwhile, $75 million worth of bills have been paid using Prism as of January 2015. The app pays about $1 million worth of bills over a peak weekend.
And, says Santee, Prism is just getting started in terms of the services it offers.
“The ultimate vision is for us to be the one-stop financial solution for millennials,” says Santee. “Banks aren’t going to go away, of course, but for all of their day-to-day finances, we’d like to see them go through us.
While Mint itself is not new, its bill-paying app is. Mint Bills launched in December 2014 and already has more than 11 million users.
A representative from Mint was not available to discuss the company’s newest app in detail, but here are some of its highlights:
Much like Prism, Mint seeks to streamline bill paying with its app — taking the guesswork out of personal finances and helping to avoid late fees.
While the older Mint app primarily serves as a rear-view mirror for personal finances, providing a look back at a user’s spending habits, Mint Bills takes a more forward-looking approach, helping people to anticipate and accomplish must-do financial tasks, like paying bills.
Features of the app include allowing you to pay all your bills and schedule your bill payments for free, including small bills such as your gym membership.
The Mint Bills app also allows you to organize your bills and accounts in one centralized place and to get reminders of when bills are due, as well as receive alerts when funds are low or credit limits are near.
Digit is easily the newest money management app on the block, launched barely more than two weeks ago.
While not focused specifically on bill paying, this app is all about helping Americans with their money on many levels, particularly increasing savings.
Digit was founded by 29-year-old University of Florida graduate Ethan Bloch, who believes financial habits create unnecessary hardships that derail people from living their lives to the fullest.
Bloch designed Digit to help people avoid such hardships by combining recent discoveries in behavioral health and psychology with technology.
Bloch, who was introduced to the behavioral and psychological aspects of Americans’ connection with money while in college, says the average individual is very bad at maintaining self-control when life is hard. And what’s more, self-control is like a muscle you use throughout the day. Eventually, that muscle gets tired. All of which helps contribute to people’s poor financial habits.
“One of the more recent pieces of research I read … said the latest figures are that around 34% of people were spending more than they make, another 30% were living paycheck to paycheck, and the remainder are making more then they spend,” says Bloch. “That same research said 45% or 50% of people couldn’t come up with $2,000 if they needed to in an emergency. They would have to use a credit card.”
“The savings rate in this country, while it it has been going up a little bit since the 2008 recession, it has been going down since the Revolutionary War,” Bloch adds.
Here’s how Digit aims to help change that: First, you sign up for Digit and connect it to your checking account. This allows Digit to analyze your income and spending and find small amounts of money it can safely set aside for you (in an FDIC-insured savings account).
Digit functions using a predictive algorithm that uses such information as how much is in your checking account today, when you are going to get paid again, and when your next bills are coming. It also considers how you have been spending money recently.
Every two to three days, Digit transfers some money that the algorithm predicts you won’t miss, anywhere from $5 to $50, from your checking account to your Digit savings account.
If you want to withdraw money from your Digit savings, you simply send a text message with the amount. The money shows up in your account the next day.
The one downside of this particular app, at least for right now, is that you don’t earn interest on your Digit savings account. But that is going to change in the future, says Bloch.
“Today it’s all about getting the product out,” he says. “Now that we’re growing, we have a considerable amount of leverage to get a better rate, and to pass that rate through to customers.”
Digit declined to disclose its user numbers. But Bloch said Digit is projecting about $5.8 million of savings per month. When it launched, Digit was saving about $1 million per month for users.
Much like his counterparts at Prism, Bloch sees such financial apps like his as the future of banking and financial management for everyday Americans.
“I think there will always be an option to stay in as much control of your finances as you want,” he says. “Even when there are driverless cars everywhere, you’re still going to be able to drive your own car. I think what we’re seeing is that banks can’t profitably service the middle class because of their cost structure. They don’t make money off the middle class. We can make money off the middle class, because it’s all software, we don’t own buildings.”
And as Santee noted, the world of financial apps is really just getting off the ground.
There are many other apps that have been developed to help manage your money in various ways, and many more to come. Some additional apps worth noting include Debt Free, which helps you pay down your debt; Level Money, a budgeting app designed to show you how much money you can afford to spend at any given time, and You Need a Budget, which allows you to track spending.