4 Reasons You Need to Pay Your Bills on Time


Paying your bills on time is one of the key aspects of taking charge of your financial life. Not only does paying bills on time help you avoid a number of nasty repercussions, but it can also have lots of short- and long-term positive side effects.

Avoid late fees

Arguably the most immediate reason to pay bills on time is to avoid late fees. Some companies and services will charge late fees just minutes after a payment is due. “Avoid expensive late fees (between $15 and $38) by sending your credit card payment on time,” writes credit expert Latoya Irby. “The first time you’re late on a credit card payment, your late fee will be as much as $28. If you’re late again within six months, your late payment can be as high as $38.”

It’s especially important to avoid late fees because those extra charges can make an already tight budget even more difficult to manage. If paying for late fees causes you to be unable to afford paying the next bill on time, it can snowball into a vicious cycle of late fees that can be tough to break.

Improve credit score

Paying bills on time is the best thing you can do to improve your credit score. According to FICO, one of the two major credit scoring companies in the United States, payment history is responsible for 35 percent of your score. The other company, VantageScore, doesn’t give percentages but does say that payment history is “extremely influential.” Paying bills late can greatly hurt your credit score, and the later you pay, the greater the damage.

Your credit score benefits the most from you making your payments, credit card and otherwise, consistently on time for long periods of time.

Enjoy lower interest rates and more access

Paying bills on time leads to an improved credit score, and an improved credit score leads to lower monthly payments when it’s time to take out a loan. Whether you’re buying a car or getting a mortgage for a house, you can get better interest rates with a higher credit score.

Additionally, improving your credit score by paying your bills on time can help you access better products. For example, the U.S. Federal Trade Commission says that “cellphone providers and landlords also use scores when considering a new customer or tenant.” If your credit score is high enough, you could improve your chances of getting that nice flat that other people are competing over.

Insurance companies will also use your credit score to determine how likely you are to file claims and the amount you might claim. “They consider this information when deciding whether to give you insurance and how much to charge,” the FTC says.

Reduce stress

By paying your bills on time and raising your credit score, you are effectively improving your quality of life. Thanks to reduced interest rates, monthly payments become more affordable, giving you more room in your budget or simply making it easier to continue paying bills on time. Among other factors, this can significantly help reduce stress.

“You’ll have no more wondering about whether you’ve paid a bill, if you have enough money to cover the amount due (because you have other bills due as well) or how much you’ll have to pay in late-payment fees,” Erik Haagensen writes for Investopedia. “And it will be simpler to keep your checking account balanced. You can rest easy knowing that your financial house is in order.”

Paying bills on time can be difficult for reasons other than coming up with the money. Between all the various utility bills, monthly car payments, mortgage payments and various insurance bills, staying on top of it all can be a headache that you might be tempted to ignore. Fortunately, there are many ways to make that headache go away. Consult an expert at your local financial institution to help you manage your bills in the most efficient way possible.

Related Articles

Leave a Reply