This post assumes that you are not living paycheck to paycheck and have money in the bank to cover your bills as the 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 (assuming there isn’t a discount for paying early) you should pay the bill on the due date. This will allow your bank account more time to accrue interest on the money.
This is how I used to pay my bills when interest rates were 3, 4 or even 5 percent but with today’s 0.8 percent interest rates the extra interest I get for waiting a couple weeks to pay my bills just doesn’t justify the risk of making a late payment or forgetting about a bill.
How Paying Bills on the Due Date Can Backfire
If you wait until the last day to pay your bills you run a lot of risks that ultimately will cost you more than the pennies you will likely earn for waiting. The first risk is that when it comes time to pay your bills the money simply isn’t there to pay it. Uh oh… somebody made a boo boo… This happens happens a lot if you aren’t on a budget and 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.
If you’re like me you throw your mail all over the house and don’t look at it again for a few days (if not a few weeks). Flat surfaces attract paper, junk and other things. When you finally get around to cleaning it up… DARN IT… I forgot to pay that bill. That or your spouse/significant other cleans the house and doesn’t even notice the bill is in the stack and throws it away! If this happens you’re in a whole mess of trouble. What kind of trouble you ask?
You Will Have To Pay A Late Fee
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 at today’s rates. If that isn’t enough to convince you maybe the next point will.
Your Interest Rate Could Go Up
I guarantee if you’re interest rate goes up on a loan or credit card because of a late payment it is going to be a heck of a lot more than that 0.8 percent 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.
Your Service Could Be Cut Off
Forget to pay your cable, internet, land line phone (I still have one), cell phone, electricity, gas, water or other service related bill and they can cut your service 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…
The Bill Could Get Sent To Collections
Is this the second notice you 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 you need to pay your doctor. Totally worth a few cents of earned interest.
You 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 all subsequent debts to the tune of thousands of dollars over your lifetime.
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 0.8%.
Do you pay your bills when you get them? If not, are you going to start?