In the past year, 34 million people—15% of American adults—have made a late credit card payment, and 8% have missed a payment entirely.* Because the consequences are longer-lasting than one might think, it's worth developing a system that will enable paying bills on time each month.
Why timely payment is important
Paying bills on time saves you money by eliminating late fees, boosting your credit score, and enabling you to obtain lower-interest credit in the future. Also, a late credit card payment may result in an interest-rate hike or a lowered credit limit.
"The ghost of past misdeeds will haunt your credit file for a while," warns Dayana Yochim, a consumer finance analyst with The Motley Fool multimedia financial services company based in Alexandria, Va. She notes that one third of a credit score is based on on-time payments.
"The good news," she says, "is that your most recent payment habits carry more weight and, in time, will matter much more than those youthful indiscretions. In other words, vow from this day forward to put the check in the mail on time."
Seven steps to bill-paying health
How to find time each month to manage bill payment as well as to juggle office work, housework and caring for loved ones? Here are seven tips to help you create a system that makes it easy for keeping track of bills and paying them quickly:
- Prioritize. Set aside money for your bills before you spend money on discretionary areas such as entertainment. That way, you won't have to wait until your next paycheck to pay a bill—and therefore pay it late—because you spent too much money on a night out.
- Go electronic. Set reminders on your electronic calendar that go off a week or two before bills are due. Or, use the automatic-payment feature that many companies have for automatically deducting the amount due from your bank account on the due date.
- Make a date. Schedule bill-paying days on your calendar, then be sure to keep the appointment just as you would keep any other appointment. Scheduling to pay bills twice monthly—perhaps on the first and fifteenth, or on paydays—will help streamline the process.
- Create a bill-paying location. Rather than letting bills pile up on a kitchen counter, designate one place in your home for paying bills and keep there everything you require: your checkbook, stamps, pens, envelopes, filing system to keep track of your paid statements, and your computer (if you pay some bills online or use financial software such as Quicken to keep track of your expenses).
- Organize your bills. An easy way to keep track of due dates is to file bills in one of two folders: bills to be paid the first of the month and those to be paid the 15th (or, with the month's first paycheck and then second paycheck).
- Track it. If you're not using a financial software package to keep track of your bills, you can still track them easily by keeping a list of each bill you need to pay along with the due date and amount due. As you pay each bill, cross it off your master list and write the check number on the stub. File stubs by category such as "Electricity" or "Car Insurance."
- Give it time. Allow plenty of time for your check to arrive, leaving extra time for weekends and holidays. If you pay bills electronically, you still may have to set up the payment a few days in advance in order for it to be received in time. Check with your creditors for their guidelines.
*National Foundation for Credit Counseling, 2009 Financial Literacy Survey, April 2009