Paying bills on time can save you money

Understand the costs and repercussions of paying bills late.

It is safe to say that most consumers would prefer to pay their bills on time. However, many are not which can lead to hefty fees and challenged credit. What are the costs associated with paying bills late? They can vary, which is why it is so important to understand the terms and conditions of credit and services that you commit to? Potential fees for not paying bills on time could include:

  • Late fees
  • Increased interest rates on credit cards
  • Shut off notices and or discontinuation of services (i.e. utilities, etc.)

(Tip: To better understand credit card agreements visit the Consumer Financial Protection Bureau.) 

What are potential repercussions for paying bills late? In addition to the out-of-pocket expenses mentioned above, paying bills late lead to negative reporting on your credit report. This is significant because your credit affects so many things in your daily life, including:

  • The ability to rent an apartment
  • The ability to get a job
  • The cost of insurance premiums (i.e. auto, renters, etc.)
  • The cost of future credit (i.e. auto loan, mortgage loan, etc.)
  • Keep in mind it takes about 24 months to restore damaged credit from late payments

(Tip: To obtain a copy of your “free” credit report visit 

What are some tips that might help consumers pay their bills on time?

  • Track your spending for one month. This will help you see what you’re spending looks like on average and where your money is actually going. Tracking could be writing every purchase down or saving every receipt and then adding them up at the end of the month. Once you know where your money is going it is easier to make changes with your spending.
  • Create a budget or spending plan. Budgets can be paper and pencil, a budget template or a computer program. Visit Michigan State University Extension for a variety of budget resources. Remember for a budget to be effective it should include: savings, all expenses (i.e. fixed, variable and occasional), and all income. Balance your budget monthly: your savings plus your total expenses equal out to your income, if this is not true increase your income and/or decrease expenses and spending.
  • Use a calendar to create a visual reminder of when bills are due and how much you owe.
  • Consider requesting alternative due dates from creditors, to better reflect your pay periods.
  • Create an emergency fund or rainy day fund to help with unexpected expenses. Industry recommendations are three to six months of monthly expenses.

When you make small changes, they can really add up. Finding extra money in your budget will help you meet your financial goals. For a variety of financial resources, including how to develop a monthly budget and set financial goals, visit Michigan State University Extension. In addition, Michigan State University offers money management and homeownership classes. For more information about classes offered in your area visit MI Money Health.

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