You know paying your bills late is a bad idea, but it happens to the best of us. You can lose track of dates and send money just past the deadline. Or, when payday comes a week after your bill, you might have to transfer funds past the due date.
It doesn’t matter why you pay your bills late to your creditors. If you miss a due date, you will always face the same consequences: late fees. And when it comes to credit card, line of credit, or personal loan bills? You could add interest and face credit damage, too.
A fine can make a bad thing worse, especially during a tough month. So how do you avoid these fines? Keep reading to learn everything there is to know about late fees. Below, you’ll find tips on avoiding default on your loan or line of credit.
What Are Late Fees?
Late fees are the penalty for paying bills late. Creditors apply late fees to deter customers from paying whenever they want, so they get their money on time.
How much being late costs depends on your creditor and account. Some creditors may calculate their fine as a minor percentage of your balance owing, somewhere between one and five percent. Others slap a flat fee against your account, ranging from $10 to $35 each time you miss a due date.
Are There Any Other Consequences for Paying Late?
A fine may not be the only repercussion of missing your due date. Depending on the account in question, you might also pay extra interest and see your credit score dip.
1. Compounding Interest
In the case of personal lines of credit and credit cards, for example, interest applies to your balance. That’s a normal part of these revolving accounts. It’s important to note that your fine will increase your balance, even if you don’t make any more additional draws against your limit. As a result, you’ll accrue more interest on this account.
2. Credit Damage
If your creditor is worried that you are too far behind on your payments, they may let the credit bureaus know you haven’t paid. Sharing this info with the credit bureaus will affect your payment history negatively, which can drag your score down significantly. Even just one late payment has the power to drop the average consumer’s score by 180 points.
In serious cases, creditors may also charge off your account or send it to collections. Besides being hounded by a debt collector, you will also suffer from a noteworthy slump in your score.
Stop Paying Your Bills Late
Here’s what you can do to pay your bills on time:
- Make a note of your due dates, tracking them in a convenient calendar.
- Create payment reminders for irregular or variable payments. Use your phone or write yourself notes to ensure you don’t forget to transfer this money.
- Enroll in reminder services provided by your creditors. They will email or text you before or on your due date.
- Set up autopay to cover your regular and fixed bills.
- Sit down with your budget to ensure you have the money you need in your account to pay bills, by hand or autopay.
- Cut down on spending to avoid wracking up a big balance you can’t afford to pay on time.
- Before borrowing money, always confirm you can handle every scheduled payment by the due date.
- Budget so that you save money in an emergency fund — you can rely on these savings to help you cover bills during a rough patch.
Late fines are a needless drain on your budget, so follow these tips to keep them out of your life.
