Today’s article assumes that you are not living paycheck to paycheck and have money in the bank to cover your bills as they come in.
If you don’t have some money saved up yet, keep working and remember to apply this when you have some cash in the bank.
So you have money sitting in the bank and you get a bill.
What do you do?
In order to get the most out of your money, you should pay the bill on the due date.
This will give you more time to accrue interest on the money in your bank account.
This is how I used to pay my bills when interest rates were three, four or even five percent.
With today’s interest rates at one percent or less, the extra interest I get for waiting a couple of weeks to pay my bills just doesn’t justify the risk of making a late payment or forgetting about a bill.
Now I pay my bills when they arrive. Here are a few reasons you should, too.
How Paying Bills On The Due Date Can Backfire
If you wait until the last day to pay your bills, you run many risks that ultimately will cost you more than the pennies of interest you could earn for waiting.
1. The Money Isn’t There To Pay The Bill On The Due Date
Uh oh! Somebody made a mistake! By waiting, you risk not having enough money when it comes time to pay your bills. This happens more than you’d think, especially if you aren’t using a budget and you aren’t thinking ahead.
You might have misjudged the total amount of all of the bills you have to pay or maybe a surprise bill came up. Regardless of why it happens, if the money isn’t there you can’t pay your bill.
2. You Might Misplace The Bill And Forget To Pay It
Flat surfaces attract paper, junk and other things. If you’re like me, you throw your mail in a pile and don’t look at it again for a few days or, honestly, a few weeks.
When you finally get around to cleaning up your pile of mail and other junk you realize… DARN IT! I forgot to pay that bill.
Another potential hazard is when your spouse, significant other or roommate cleans the house and doesn’t even notice a bill is in the stack of papers and throws it away. If this happens you’re in a whole mess of trouble.
What kind of trouble you ask?
3. You Could Incur Late Fees
Yup, if you pay your bill late chances are you’re going to incur a late fee. Most late fees will eat up multiple years worth of interest on your savings at today’s rates. If that isn’t enough to convince you maybe this next pitfall will.
4. Your Interest Rate Could Go Up
I guarantee if your interest rate goes up on a loan or credit card because of a late payment, the extra cost is going to be a heck of a lot more than that one percent or less you are earning yearly for a few days in your savings account.
Multiply this out by the life of the loan and you’re talking some serious cash.
5. Your Service Could Be Cut Off
That would be a nasty surprise when you don’t wake up the next morning because your alarm clock doesn’t go off due to a lack of electricity. I hope you don’t lose your job for being late.
6. The Bill Could Get Sent To Collections
Is this the second notice you have received to pay that bill because you threw the first one away? Do it again and it might go to collections over a measly $10 copay owed to your doctor.
Totally worth a few cents of earned interest. NOT!
7. Your Credit Rating Could Get Dinged
If you’re excessively late and your debt goes to collections your credit score WILL get dinged. This leads to higher interest rates on future debts to the tune of thousands of dollars over your lifetime.
If this happens to you, you need to learn how to fix your credit. Sites like CreditKnocks can help you understand your credit and work to improve it.
Well, there you have it. Those are the reasons I pay my bills when I get them. In my mind, the cons of waiting greatly outweigh the pros in most cases. Especially when your interest rate is a measly one percent or less.
Want to make sure you never pay a bill late again? Check out this awesome post that shares 7 ways to make sure you never pay a late fee again. It even includes a free downloadable spreadsheet!
Do you pay your bills when you get them? If not, are you going to start?