Credit Sesame advises on comparison shopping for big expense items during Self-Improvement September.
Although gas is a big expense on a monthly basis, driving from gas station to gas station looking for the cheapest gas is probably one of the worst ways to save money.
Time and gas is wasted, and you are unlikely to save more than a buck or two. If your car has a 10-gallon gas tank and you find a station where a gallon of gas is 10 cents cheaper than at another station, then you save only $1 when filling up.
A better solution is to find a station near your home that consistently has low prices, and make it your main spot for filling up. Prices fluctuate at gas stations often, so the price you pay at your neighborhood station may be higher from time to time compared to other stations, but overall you should see lower prices and at worst you’ll pay $1 more.
However, if you are shopping for single big expense items, your efforts may be better rewarded by comparison shopping. Here are a few big expense items that deserve a bit of extra effort to save money, especially during self-improvement September.
Comparison shopping for beds
The average price for a Queen bed is $600 for a budget bed made of basic materials, $1,000 for mid-range bed using quality materials, and $1,800 for a luxury bed of high-end materials, according to the Sleep Foundation.
The markups on mattresses can be huge, which means there is an opportunity for savvy shoppers to find cost savings by comparison shopping. A Consumer Reports investigation found that local mattress stores sell at markups of up to 900%. This means that a mattress costing about $300 to make sells for $3,000.
An easy way to comparison shop is to go to a mattress store and try out a few beds. Chances are you can find one that’s comfortable and fits your budget. Paying more for a high quality bed can be worthwhile. It may give you a better night’s sleep, and may last longer than a basic bed.
But huge price differences can be found among mattress sellers, for a variety of reasons. Hundreds of companies are competing for your business, so comparing prices among brands can help you find a great deal.
Holiday sales on beds happen throughout the year. President’s Day, Memorial Day, Independence Day, and Labor Day are common sales periods every year. Buying a mattress online can also save you money, since online retailers have lower overhead costs and can sell at smaller margins.
Comparison shopping for loans
Shopping for a home, car or personal loan requires getting quotes from at least three lenders. It’s not as much work as you might think, and can often be done online in a few minutes. A mortgage loan takes some work, but you can save more because a home loan is often large and lasts for decades.
It’s tempting to take the first loan offer you receive. After all, if your credit score and other financial information is the same for each lender, then won’t loan offers be similar? Not always.
Some lenders have low overhead costs, such as online lenders where applicants fill out an online form for before getting a loan estimate. Some lenders also charge an extra $1,000 in broker fees to originate a mortgage, according to a 2018 study by Freddie Mac.
For a typical $250,000 home loan, the average expected savings from one additional quote is $1,435 over the life of the loan, the study found. Borrowers saved more as they shopped for more quotes, with five rate quotes pushing the average savings to $2,914. The biggest savings happened during challenging economic times.
An interest rate is the most obvious variable to shop for. Terms and fees should also be compared, including buying mortgage points that you pay upfront to buy down the loan’s interest rate. Some lenders structure their points differently, so you may be able to save by shopping around for points. Shopping with a variety of lenders such as big banks, credit unions, online lenders and regional banks may also help you save.
Comparison shopping for insurance
Insurance is one of those boring but often mandatory purchases that can make you want to renew automatically without going through the hassle of shopping around.
One survey on auto insurance found that 26% of Americans have never compared multiple insurance quotes. Of those who do, 66% said it takes 30 minutes to two hours to compare rates, and 73% said they saved money while shopping around. Most people saved $100 to $499.
Car and home insurance quotes can require a fair amount of information so that you’re comparing apples to apples. Coverage limits in different categories are where you can save the most, with some carriers offering much cheaper prices for less coverage in some areas. A high deductible also helps. Drivers with a few traffic tickets or accidents can expect to pay more, as can homeowners who have filed a few claims recently.
Combining home and auto insurance policies with one insurer can get you a bundling discount of 5% to 20% or more, according to U.S. News. Get at least three price quotes to get the most savings, and ask for rate quotes with and without the bundling discount.
Comparison shopping for credit cards
Whether it’s your first card or you have a long and strong credit history, shopping for the best credit card interest rate can save you a lot of cash.
A high credit score is likely to get you the best rate. Raising your credit score can be enough to ask your credit card provider for a lower interest rate, so start by paying your bills on time to get the biggest credit score jump.
Consolidating credit card debt with a zero-interest, introductory rate balance transfer card can save you a lot of money if you have high debt and can pay the balance off when the intro period ends, usually in about a year.
The average credit card interest rate is 19.86% for new offers and 15.13% for existing accounts, according to one report.
For a credit card balance of $5,000, a 19.86% rate and a minimum payment of interest plus 1% of the balance, which equals a minimum payment of $132.75 in this case, it would take five years to pay off the balance. The total interest is $2,896.
Drop the interest rate to 15.13% and under the same scenario the minimum monthly payment is $113.04, and it would take five years and six months to pay off the balance. But the total interest drops to $2,359, a savings of $537.
Why it’s worth shopping around
Clipping coupons and driving around looking for better gas prices may save you some money, but bigger expenses are likely to get the most reward from shopping around and comparing prices. Some things are negotiable, such as a bed, while home insurance and car loans may have less wriggle room.
At the very least, it’s worth spending 30 minutes or so every year when your insurance is up for renewal, or when you’re thinking of buying a new car, to call a few insurers or check online to see if your rates can drop. It might be so easy and save you so much money that you’ll turn it into a lifelong habit.
Consumers who enjoyed comparison shopping for big expense items may also be interested in:
- How to Ask for a Lower Interest Rate on Your Credit Card
- Save Money With These 3 Holiday Shopping Hacks
- A New Credit Card Can Make it Harder to Get a Mortgage
Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.
