Pay Bills On Time

I always pay my bills on time.  

First, paying on time avoids penalties and interest which can add up quickly because it compounds.  In the worst case, these may exceed the initial bill over enough time. Penalties and interest on late or delayed payments is a death spiral I want to avoid.

Paying one's bills on time helps prevent living above one's means, which can be very detrimental to being successful at managing one's personal finances.  Right after college with a degree in chemical engineering, I worked for a Fortune 10 company.  I always paid my bills on time, even when I ran out of funds the first month working.  I had a friend who believed in maxing out her credit cards and paying only the minimum each month since she would have a higher standard of living.   Before long, her bills exceeded her take home pay and she took a second job as a in order to make ends meet.  Sheesh.

Doing so builds one's credit score and credibility with lenders, which is valuable.   My credit score typically is in the 800s.   As a result, I qualify for lower interest on loans, including  mortgages and car loans.  

Credibility may allow lenders to waive let fees for an abnormal missed payment by the deadline.  There have been a couple times I have been late.  One time, I mistyped the electronic payment and was off by a few dollars.  The credit card company charged me interest on the full amount even though I paid over 95% of the amount due.  I called in immediately and explained I had made a transposing error on the last two digits.   Also, I told them my record should show I always paid way before the due date.  The customer service rep did a one time waive of the interest charge based on my past performance.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial nor credit card advice. Please consult a professional advisor.

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