Late payment of bills can have long term financial consequences, in addition to perhaps incurring a late payment penalty. Whilst utility bills and rent payments do nothing to build your credit score, late payments will be reported to the credit rating agencies and have a detrimental impact on your financial reputation. The importance of establishing a good credit score is vital for anyone considering a home purchase, insurance and even a career change.
Late payments on financial obligations can result in increased interest rates, fees and defaults. The last thing anyone struggling to meet their bills needs is extra costs imposed due to late payments. To ensure that bills are paid on time one needs to prioritise their payments before other expenditure.
Draw up a list of each regular bill and calculate the annual expense. Include provision for bills that are not recurring so that a one off annual bill can be budgeted for by putting money away for it each month, preferably in an account that yields interest. Take the annual figure and divide it into months to ensure that enough is put aside at the beginning of every month to meet all financial obligations.
The simplest and most effective way of never paying a bill late is to automate the payments from a bank account. Contact each of the providers and set up automated payments in the U.S., and direct debits or standing orders in the U.K. Try to select a date a few days after your salary arrives in the bank so that all the bills are paid at the same time.
Arrange with utility providers to pay a set monthly amount that can be adjusted annually to take account of over or underpayments. Arrange an automated payment to clear the full outstanding balance of your credit card each month so interest payments are avoided. Paying everything automatically is easy to organize and prevents bills being overlooked. Additionally it reduces the hassle and expense of writing and posting checks or making payments into in a bank or company.
Those who have been turned down for a current account should consider opening a bad credit account to facilitate ease of payments. Not only will it help to improve credit reputations but it establishes a good financial habit. Those paid in cash should also follow this method of bill paying as it is far easier to spend cash in hand rather than prioritising bills.
With the advent of many additional features which banks provide those who do not choose to automate payments can elect to have timely text or e-mail reminders, to ensure bills are met on time. It is easier to establish all bill payments to be due on the same day if salaries are paid monthly, to avoid forgetting a bill which is due on a different day.
Organizing automated payments is the easiest and most effective way of establishing good financial habits, as well as being vital for those who have problems remembering to pay on time. Remember that each bill paid late will cost you in some way, whether it is in a charge, an increased interest rate or a bad credit rating that can take time and work to restablish.