If you had to pick a single New Year’s resolution this year, make it to pay your bills on time. This seemingly simple goal has the power to transform your finances for the better. With benefits such as improved credit history and fewer late fines, paying bills on time is a smart habit to develop at any time of the year. But it can be hard if money’s tight.
Enter this guide. This article is here to help you understand the value of paying bills on time. More importantly, it shares tips on how to pay bills promptly.
Why is Paying Bills on Time Important?
Paying bills on time pays off in three major ways:
1. Late Fines:
If you’ve ever paid a bill late, you know it can come with some steep consequences. The most common is a late fine. Many creditors, banks, online lenders, and businesses apply fines for late payments by 30 days or more.
2. Interest:
Depending on the account, you may also have to pay more for your mistake. Certain personal loans, credit cards, and lines of credit may apply additional interest on the outstanding amount. This extra interest payment gets rolled into your old balance, increasing what you owe.
3. Credit Damage:
Last but not least, a tardy payment might also impact your credit score. Maybe you have a question: how is my score calculated? Your three-digit score is a product of five major factors, one of which is your payment history. If a business or online lender reports you have paid a bill late, this will become a late payment entry in your history.
The exact effect lateness has on your score depends on the existing details of your record. However, it’s never very good.
How to Improve Your Timing
Paying bills on time is within your reach. You just have to make minor changes to the way you spend your money throughout the month. Here are some easy tips to get you started:
Familiarize Yourself with Your Responsibilities
Make a list of all your bills, making a note of when each one is due and how much they cost.
Sit Down with Your Budget
Create a budget by hand or with an app. In either case, use this plan to ensure you have the cash for all your bills. You want to prioritize their due dates over other spending. In other words, pay these bills first before you splurge on fun things. You might have to sacrifice some of these unnecessary expenses to find this balance.
Talk to Creditors
If you live paycheque to paycheque, you may be waiting until payday to send money. Unfortunately, your due date and payday don’t always sync. In this case, ask your creditors if they can change your due date. Not every business will do this, but some do. You have better luck at convincing them if you can guarantee you will have the money to pay your entire balance by the proposed date.
Automate What You Can
It’s easy to forget an important due date when you’re busy. Life can get in the way of your good money management goals.
Automating payments can prevent this annoying error from impacting your credit history. Authorize your bank to transfer funds on a predetermined schedule.
Consider Paying with a Credit Card
Automating these transfers to come from your credit cards can help you earn rewards while tracking your spending. Just make sure you always have the cash to pay off this account by the due date.
And there you have it — everything you need to know about paying bills on time.
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