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In the world of credit cards, the saying “time is money” should really be “timing is money”, especially when the topic is making payments on time. Once you’ve found a 0% interest balance transfer card or a great rewards card with a low regular interest rate, you need to be certain that you make each and every payment on time, every time. Otherwise, you could end up in a lot more debt than you realize.
Before you put your credit card bills on the backburner, consider the information below. It may very well change the way you think about your cards in the future.
Why On-Time Payments Are So Important
Defaulting on your credit card payment even once (meaning making a payment after the due date) will, at the very least, result in a late payment charge – sometimes as high as $35 or more. Some credit cards allow a “free pass” for your first missed payment like Discover It, but every credit card company has a fee that it charges for people who fail to make their payments before a certain day of the month. It doesn’t matter what your reasons are or how late the payment may be. A simple hour can cost you extra if you’re not careful.
On top of the late fee, you might lose your introductory interest offer by making a late payment. That means you will owe more than you originally planned because you are now stuck with the standard rates that apply after the introductory offer ends. If you think you can just use your cash back to cover the money owed, think again. You have to have your monthly payment in place and on-time for that to happen. Long story short, you credit card will become less and less useful without a proper payment schedule. It’s your responsibility to create that.
How to Ensure You Make Your Payments on Time
Organization is key to ensuring that your payments are made on time. Find a card that offers free online account management that allows you to sign up to have an email sent every time a bill is due. If you enroll in automatic bill payments, you should be able to pre-schedule the minimum amount due to be paid on your card, without any effort on your part. Then at least you know that you’ll avoid a late fee.
If your financial situation will allow, an even better situation is to set up autopay to pay your balance in full each time. Both options are usually included in any automatic payment program. However, while automatic payments can be a great time saver and safety net, you still want to make certain you review your credit card statements and the balance in your bank account each and every month. An overdraft fee on your bank account can be as high as the amount charged for a late payment, which completely contradicts your efforts in setting up auto bill pay in the first place.
On top of all that, you could set aside a certain day or week of the month to make all your payments. For instance, I pay all of my bills during the first week of the month – even those that are due at the end. I simply go down a list of companies I have to pay and make my payments online. Then I have the rest of the month to do whatever I want to do, and I know my credit cards, utilities, mortgage, etc. are all taken care of. Knowing your monthly budget will help keep you in check. In general, about 50% of your income should go towards your essentials. Another 20% should go towards future planning, such as paying down past debt and making deposits into your savings account and the remaining 30% should go towards lifestyle purchases like food or shopping.
Find a way to put yourself on a schedule that works for you and stick to it. Once you learn the right money management habits, you’ll never have to worry about a late payment again.