Published June 21, 2013
Running late for a meeting may be stressful. But running late on paying your bills should really have you worried.
"It can drop your credit score 100 points if a bill is 30 days past due," says Mitch Korolewicz, an accredited financial counselor and money coach in Tulsa, Okla. "Not to mention you can be hit with late fees of $30."
Unfortunately, many of us know the consequences firsthand. A May 2013 survey by Citi shows that half of Americans have made a late payment on a bill at some point -- and of those, 88 percent messed up in the past year.
Excuses abound for paying bills late, but that doesn't mean they're good ones. It's time to fgure out why you're paying late and how to implement do-able strategies designed to make your payments punctual again.
Excuse No. 1: I forgot.
It happens to the best of us. You go on vacation, your schedule gets out of whack, and boom! A due date just whizzes past you. "The biggest reason for customers missing payment due dates, across all of the payments they make, is that they simply forgot," says Anthony Merola, managing director of Citi Cards. In fact, 61 percent of late payers blamed forgetfulness.
The fix: With so many bills due on different days, keeping track in your head is nearly impossible. So create a master calendar of what's due when, then set up email or calendar alerts to remind you a few days in advance.
Most credit card companies will automatically text or email you a bill alert as well, as will financial apps such as Mint and CashTrails. If bills still slip your mind regularly, consider cutting yourself some slack and signing up for Citi Simplicity or another credit card that doesn't charge late fees or penalty interest rates. (For a list of cards that don't charge late fees, see "Carrots offered, sticks abandoned: Card issuers lure late payers.") According to Merola, the Simplicity card isn't meant to enable slackers; for generally responsible customers, it's "designed to remove the frustration and worry around late fees."
The trade-off is that with some of these cards, you'll miss out on credit card rewards. But a $35 late fee usually wipes out whatever rewards you'd earn from another card anyway.
Excuse No. 2: I don't have the money right now.
If you're spending more than you're earning each month, you'll never get up to date until you adjust either your income or your expenses. But often, having enough to pay bills on time is just a matter of "paycheck planning," says Kathryn Moore, a financial counselor with GreenPath Debt Solutions, in Detroit.
The fix: Shifting your due dates, which many credit card companies and other businesses allow you to do, can be enough to solve a cash shortage problem. "If you have $2,000 worth of bills and $1,500 of those are due at beginning of month, then see if you can push some of those to the second half of the month," says Moore.
Batch your bills to align with each of your monthly paychecks, then pay them right away. "It's never easier to pay a bill than on the day that you get paid," Moore points out. Plus, you'll know exactly how much you have left for other spending.
Excuse No. 3: I have no idea where my bill is.
That daily avalanche of mail and paperwork? If there's nowhere to put it, you'll scatter envelopes wherever you happen to be, so the utility bill ends up in a drawer, the credit card bill on top of the fridge.
The fix: To deal with bills promptly, you need a system for handling incoming mail. "One's inclination is to leave things out so you don't forget it, but then stuff quickly piles on top of it and it's lost," says certified professional organizer Janine Adams, owner of Peace of Mind Organizing in St. Louis. "The key is you have to deal with your mail on a daily basis." She suggests creating an "action box" where you put bills and other paperwork that needs attention. Then get in the habit of sorting through it once a week. Just knowing where to look for a payment slip can save you late fees.
Excuse No. 4: I just got too busy.
With jam-packed family and work schedules, who has the time (or the inclination) to sit down for bill-paying sessions that last for hours?
The fix: More businesses, including the major credit card companies, allow you to pay bills online or with downloadable apps, so you can make payments whenever you have a spare minute. Even simpler is to automate bill pay, either through your biller's website or through your bank or credit union's online portal. That way, money gets transferred automatically, and you don't have to think about it.
Excuse No. 5: I procrastinated.
Paying your bills isn't exactly a party; of course you put it off. "Delaying is a completely normal impulse," explains Joseph R. Ferrari, a professor of psychology at DePaul University in Chicago, and author of "Still Procrastinating? The No Regrets Guide to Getting It Done." But push it too far and late fees pile up.
The fix: Because procrastination hinges on avoidance, not time management, Ferrari suggests confronting your tendency to delay head-on by "publicly posting on Facebook and Twitter when you have something that you need to do." The encouragement to act -- and the shame if you don't -- may motivate you.
For chronic procrastinators, who often need professional help to overcome their delay tactics, it's best to start small. Think of it like trying to lose weight. "You're not going to lose 40 pounds in a month, but you can lose four pounds," says Ferrari. "And you may not pay all eight of your bills on time, but you can pay two on time."
In much the same way insurance companies cut rates for good drivers, a few banks issue cards that reward on-time bill payment. The Bank of America Better Balance Rewards card, for instance, credits you $25 a quarter if you pay more than your minimum balance on time every month. You could also just try rewarding yourself. An ice cream cone and no late fees? Sounds like a solid incentive.See related: Late fees inflate balance of forgotten card, Even barely late payments can impact your credit score, Putting card payments on automatic can hurt your credit