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. You can also try our save $1,000 in 90 days challenge.
So you have money sitting in the bank and you get a bill.
When should I pay the bill?
In order to get the most out of your money, you should pay the bill on the due date.
This gives you more time to accrue interest on the money in your bank account.
This is how I used to pay my bills. Of course, that was 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 doesn’t justify the risk of making a late payment.
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 your bills are due soon, you run many risks that ultimately could cost you more than the pennies of interest you might earn for waiting.
1. The Money Isn’t There To Pay The Bill On The Due Date
Sometimes mistakes happen. 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 thinking ahead.
You might have misjudged the total on all of the bills you have to pay. 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. You don’t look at that pile 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. They may not notice a bill is in the stack of papers and accidentally throw 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
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
Late payments can result in penalty APRs or other interest rate increases. I guarantee the extra cost is going to be much more than the interest you earn for keeping the money in your savings account for a few extra days.
Multiply this out by the life of the loan and you’re talking some serious cash.
5. Your Service Could Be Cut Off
If you forget to pay your cable, internet, cell phone, electricity, gas, water or other service-related bills, they can cut your service off.
That would be a nasty surprise when you don’t wake up the next morning. Without electricity, your alarm clock may not go off. If you show up late for work, you could even get fired.
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.
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 may lead to higher interest rates on all subsequent debts to the tune of thousands of dollars over your lifetime.
Don’t Risk It
Well there you have it. These are the reasons I pay my bills when I get them. In my mind, the drawback of waiting greatly outweigh the benefits. This is especially true 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?
Lance Cothern, CPA holds a CPA license in Indiana. He’s a personal finance, debt and credit expert that writes professionally for top-tier publications including U.S. News & World Report, Forbes, Investopedia, Credit Karma, Business Insider and more.
Additionally, his expertise has been featured on Yahoo, MSN, USA Today, Reader’s Digest, The Huffington Post, Fast Company, Kiplinger, Reuters, CNBC and more.
Lance is the founder of Money Manifesto. He started writing about money and helping people solve their financial problems in 2012. You can read more about him and find links to his other work and media mentions here.
Thursday 18th of September 2014
We recently had a change in mailmen and have had quite a bit of difficulty getting our mail. We have missed magazine,, newspaper and bill delivery. I handle my mom's finances and recently realized that I had never received her insurance premium. Fortunately I realized this in time to call the company and arrange a direct transfer from her account. Needless to say, I have now put that bill on direct pay from her bank account. Otherwise, to answer your question, I pay bills as soon as they come in.
Sunday 21st of September 2014
That stinks with your mailman. Luckily I keep a spreadsheet that lists when I get my bill so I make sure I don't miss any.
Thursday 18th of September 2014
I always try to pay bills at least 7-10 days before they are due. Since most are paid electronically, that's more than enough time for everything to clear, and enough cushion that if there is some sort of error along the way, I will have time to react without penalty. Property taxes were due on the 15th, but I made sure to set the transaction for the 5th just to be 100% sure everything worked.
Sunday 21st of September 2014
That works too. I just pay early so I don't have a chance of forgetting :)
Daisy @ Add Vodka
Saturday 16th of June 2012
I try to autmoate my bills as much as possible so that I don't forget to pay them. In an effort to go green, I went paperless so I get email reminders when my bills are updated, but I never checck my email. Woops!
JP @ My Family Finances
Friday 15th of June 2012
I sign up for auto pay with many of the companies that I have bills with so that I avoid the late charge thing. I do this because I save my expenses monthly and earn a very little extra income each month. It's not much, but since companies allow you to earn money off your bills, I take advantage of it.
Thursday 14th of June 2012
Now that I get some bills on email, some are paid automatically and other obligations don't even bill lme, I'm kind of chaotic around the bill issue. I need a better system to organize. DAre I admit I like the good old days when they all came in the mail and I could touch them and organize :)