- Perhaps the most important thing to remember about paying bills is the need to pay bills on time.
- There are many different ways to pay bills — the best one for you will depend on your individual needs and circumstances.
- Various techniques and strategies can instill the kind of habits that make it easier to pay bills on time.
Paying bills may not be your favorite task, but it's not one you can afford to skip. Rent or mortgage payments, utility bills, and credit card bills won't just go away, after all.
The good news is that handling bill payments doesn't have to be a hassle. Creating a simple system for how to pay bills each month can save you time and (potentially) money, too.
Why You Need to Pay Bills on Time
When a biller issues a bill to you, there's usually a due date that you need to pay by. The due date should be printed somewhere on the bill. Bill due dates are not suggested time frames for paying; they're the latest date the biller expects you to pay.
There are a few reasons why it's essential to make bill payments on, or before, the due date:
- Late payments can hurt your credit. Credit scores are a measure of how responsibly people use credit. Payment history accounts for 35% of your FICO credit score. Paying on time can help your score, while paying late can cause your score to drop. A lower score can make it harder to get approved for new loans and lines of credit.
- Paying late may trigger a penalty APR. Paying credit card bills late could lead to a higher annual percentage rate (APR) if your card issuer applies a penalty interest rate. (That's a special rate the credit card company can charge if you miss a payment.) Penalty rates can easily approach 30%, making carrying a balance on your card month to month much more expensive.
- Billers can charge late fees. Aside from potential credit score damage, paying bills late can cost you if you're being hit with fees. The more often you pay late, the more of your hard-earned money you're likely to hand over in fees.
- Your account could be suspended. Paying certain bills late could result in a suspension of your account. For example, if you fail to pay your electric or internet bill on time, your service provider could cut you off. You'd have to pay the bill to have service restored and you might be charged a reconnect fee in the process.
Paying bills late doesn't benefit you in any way. Even if you can avoid late fees or credit score damage, your billers aren't likely to appreciate your tardy payment habits.
Different Ways to Pay Bills
There are lots of options for how to pay bills. Choosing the right payment method for you comes down to what kind of bills you have to pay and how you prefer to manage your finances.
Some of the different ways to pay bills include:
- Check. Writing checks might seem old-fashioned, but plenty of people still pay bills this way. And you might have some accounts that can only be paid by check. For example, if you pay a local company for lawn-care services, they may prefer check payments versus credit or debit cards to avoid payment-processing fees.
- Debit card. Paying bills with a debit card is as simple as calling the biller and providing your debit card information. You can also pay online. When you pay by debit card, your money is deducted immediately from your bank. This can make record-keeping much easier.
- Credit card. Credit cards are a convenient way to pay bills. You can charge all of your monthly bills to the card, then pay the balance off at the end of the month. Credit cards also enjoy greater fraud protections than debit cards. The key is paying the balance in full; otherwise, your bills could cost more once interest charges are added.
- Online bill pay. Many banks offer online bill payment services allowing you to pay bills from your checking account. You can schedule one-time bill payments or recurring payments, so that bills are paid automatically. That’s convenient if you'd rather not have to keep up with due dates each month.
- Bill pay apps. Bill-pay apps link to your bank account and allow you to pay all of your bills electronically in one place. You can schedule one-time or recurring payments to each of your billers through the app.
- Money order. If you don't have a bank account, you might use a money order to pay bills. Money orders work like cash, but they're more secure than cash payments. You can purchase money orders at gas stations, grocery stores, or the postal service.
- Cash. Cash is one more option for making bill payments. For example, if you'd rather pay your electricity bill in person, you could pay with cash. Cash isn't a secure option for paying bills by mail, however.
7 Steps to Paying Bills
If you're struggling with how to pay bills on time, creating an organized plan can help. Having a bill-paying routine to follow can take some of the stress out of the process. Here are seven steps you can follow to create your bill payment checklist.
Create bill-paying spaces
The first thing you can do to organize bill payments is to create a dedicated space for handling them. In this area, you'll include everything you need to pay bills.
For example, you could dedicate a small corner of your kitchen or home office to bill payments. You can organize it with:
- File folders to stash bills in as they arrive
- A calendar
- Pen and paper
- A calculator
- Your checkbook and checkbook register
- Stamps (if you're mailing checks)
Having all of these items in one place means you don't have to track them down once it's time to handle bill payments.
Check your statements
Once you set up a bill-paying space, you can go through each of your bill statements, taking note of:
- Biller's name
- Bill due date
- Minimum payment due
While you're reviewing bill statements, make sure all of the charges look correct. If you see something you think is an error, or if you have a question about a charge, don't hesitate to reach out to the biller to ask for clarification.
Review your due dates
Keeping track of due dates is central to how to pay bills — and, especially, to pay them on time. There are different ways you can keep up with due dates, including:
- Writing them on a paper calendar
- Adding them to a digital calendar
- Setting up due-date reminders through your billers
- Setting up due-date reminders through online banking
You might want to use all these methods to help ensure you won't miss a due date.
Ask about your grace periods
Some billers may offer grace periods, where either no payment is due, or you have the option to pay in full to avoid interest charges or fees.
With credit cards, for instance, card issuers are legally required to mail or deliver your bill to you at least 21 days before it's due. You won't owe interest if you fully pay your balance within the grace period.
Understanding grace periods can save you money if you can pay in full. Keep in mind that with certain bills, such as a credit card cash advance, there is no grace period, and interest begins accruing right away.
Make a bill-paying date with yourself
If you dread paying bills, you can try to lighten the pressure by making it a “date” with yourself. For instance, you might pick one night each week, or each month, to go through the bills without any distractions.
If you're still balking at paying the bills, try to make it fun. For example, you can prepare your favorite meal or a special snack to enjoy while dealing with the bills. Or you can treat yourself to something afterward as a reward for getting the task done. Changing your mindset around paying bills can make it seem less tedious, so that when the time comes to pay them, you're not finding excuses to put it off.
Streamline the payment process
Simplifying bill payments can save you time; automating is one of the easiest ways to do it.
You can schedule all of your bills to be paid each month automatically from your checking account. Again, you can do that through online bill pay at your bank, or you can schedule payments individually through each of your billers.
Automating can help you avoid late payments. And you don't have to keep a close eye on the calendar all the time, since you'll always know that bills are being paid.
Keep paying attention
Setting up a bill-payment system doesn't mean you can go completely hands-off, however. It's still a good idea to review your bills each month to look for new or unexpected charges. Tracking monthly bills can also help you to see how your costs might increase or decrease over time.
It's also important to consider which bills you might be able to reduce or eliminate entirely. For example, every six months or so, you might want to conduct an audit of your streaming services. If there are any you're paying for but are not using, you could cancel them. Doing that would give you one less bill to pay and a little more money saved.
What bills should I pay first?
The most important bills to pay first are the ones that directly affect your standard of living. For example, rent and mortgage payments, utility payments, and car insurance typically take priority over streaming services or internet services.
Is paying bills online safe?
Yes, paying bills online is generally safe and secure. Banks use high-level security to process bill payment transactions and keep your information secure. You can take added steps to secure your bill payment accounts by choosing secure passwords and enabling multi-factor authentication.
Is it better to pay bills early or on time?
Paying bills early can help you avoid interest charges and late fees. You could also potentially build credit faster if you're paying down credit card balances early, since doing so can affect your credit utilization. At a minimum, it's essential to aim to pay all bills at least by the due date to avoid credit score damage.