People miss monthly billing due dates for all sorts of reasons – from everyday distractions to identity theft – but the issue ultimately boils down to a combination of two fundamental factors: forgetfulness and cash flow. It’s nothing to be ashamed of: Roughly 24% of consumers don’t pay all of their bills on time, according to the National Foundation for Credit Counseling. But it is a problem that needs fixing, given that late payments can cost you a lot of money and significantly damage your credit standing if you’re not careful.
Fortunately, the forgetfulness issue should be fairly easy to address with a bit of organization and the right notification process. Not having enough money to pay your monthly bills, on the other hand, will most likely necessitate stricter budgeting and a strategic approach toward debt.
Regardless of the exact reasons you’re worried about missed payments, the following tips should help you improve your payment punctuality and thus your credit score, savings and even health. After all, money is America’s top stressor, according to the American Psychological Association.
- Set Up An Online Account With Each Biller: Paying monthly bills online might seem like a hassle or risk, requiring you to set up an online account with each biller and link it to one of your payment accounts (e.g., a checking account). But it actually helps you save time relative to mailing paper checks each month, for instance, and provides on-demand clarity about due dates, balances, etc. Customer support isn’t always available, but the Internet is always open.Creating an online account may also reduce your susceptibility to identity theft. A common tactic of thieves entails using certain key pieces of personal information about a victim to gain online access to one of their accounts and thereby change associated addresses, siphon funds and further intrude the victim’s financial life.
- Establish Automatic Payments For At Least The Minimum Amount: Some monthly bills have a predetermined required payment amount. Others, such as credit card bills, can be kept current with only a certain minimum payment while the balance accrues interest over time. In either case, establishing automatic monthly payments from a deposit account, such as a checking account or prepaid card, will take forgetfulness out of the late-payment equation and make it so the only thing you need to worry about is having enough cash in your account for the automatic withdrawal to be processed when your payment comes due.
- Take Advantage Of Customized Account Reminders: Regardless of whether you take advantage of automatic monthly payments, arranging to receive notifications about upcoming bills can be helpful. Such alerts can serve as a reminder to review your monthly statement for accuracy or to make sure that you have enough funds in your payment account to cover all of your pending bills. This will also give you a better idea of when your monthly bills fall each month, enabling you to take any necessary steps to improve your cash flow. There are a variety of ways that you can establish such alerts. For starters, you should be able to set notification preferences through each of your online accounts, arranging to receive an email or text message when your monthly statement becomes available, when your due date is approaching and when a payment has been made, if you so desire. You could also use the calendar feature on your email account, set reminders directly on your mobile phone or take an old-school route with handwritten reminders.
- Coordinate Due Dates: Most creditors and lenders allow customers to request a different monthly due date from the one they are provided by default (e.g. switching from the 1st of the month to the 15th). Setting up your accounts so that all your bills are due on the same date, for example, would make it easier to remember when to pay them but might also make them more difficult to afford. Arranging for your bills to come due a few days after your paycheck clears, on the other hand, would minimize the risk of insufficient funds.
- Pay Credit Card Bills Early & Often: There’s no rule against paying your credit card bill more than once per month. In fact, doing so can actually help expedite credit-building efforts by effectively reducing your credit utilization. Multiple monthly payments also enable you to more closely track spending and thereby improve budgeting performance. Keep in mind, however, that some credit card companies will still process the full amount of any previously established automatic payment if you make an unscheduled payment in the period between when your monthly statement is generated and when your recurring payment is withdrawn from your deposit account.
- Schedule A Time & Place To Pay Your Bills: It’s important to turn on-time monthly bill payments into a habit. The best way to do that is to pick a date and time to review your expenses and obligations each month, then treat it like an appointment you cannot miss. You could, for example, budget an hour or two on the first Saturday of each month for a quick financial check-up. This is a step worth taking even if you set up automatic monthly payments, as it will give you the opportunity to make sure you’re not being charged for anything you did not purchase.
- Find An Organizational Method That Works For You: Although everyone thinks and manages his or her money a bit differently, having some sort of defined method of organization and record keeping is essential for success in the realm of personal finance. It’s not just about knowing when your bills are due and whether you have the funds needed to pay them. You also have to consider tax preparation, budget maintenance and the importance of monitoring accounts for signs of fraud. So consider what organizational strategies have worked for you in the past and what you can realistically commit to given your current schedule. How and where do you want to file away account statements, receipts and other records? How do you plan to track spending relative to your budget? Do you want to receive paper account communications or have everything sent electronically? These are all questions that must be asked, and the answers all depend on what works best for you.
- Build An Emergency Fund: There’s no better way to avoid missed payments or minimize the damage done by elusive due dates than to have a robust emergency fund. Knowing that you have some money in reserve not only serves to reduce the pressure of an impending due date, it also gives you some day-to-day peace of mind given that unexpected expenses will not be able to disrupt your finances to the extent that would be possible without a safety net. It’s best to have at least six months’ take-home pay stashed away for a rainy day, but that objective will take some time to achieve. So chip away at this goal by a saving a bit more each month than you normally would.
We hope these tips help you avoid the cost and aggravation that accompanies missed payments, especially as they relate to your credit standing. Payment history is a significant component of credit scores, and missed payments can lead potential lenders to believe that you are not financially responsible.