what are the benefits of paying your bills on time
There is always hearsay that the best alternative is to pay bills on time, but after all, what are the real benefits of this?
Do you know the benefits of paying your bills on time? Despite what most may think, financial planning is very important because most adults have bills to pay and, in most cases where money management is not taken care of, several debts can be created.
The big problem with not paying bills on time is that they become debts, and their value can be considerably increased, since simple or compound interest can be charged on the amount due and, often, even cause your name to be blacklisted.
Want to learn more about the concepts we’ve introduced? Keep reading, as we’ll explain in detail all the advantages of paying bills on time. Check it out!
Check out 3 advantages of paying your bills on time
Having a financial plan, avoiding losing control and paying your bills days before they are due has several benefits. See below the 3 main advantages of keeping an eye on your spending!
- Avoid paying fines/interest
- Stay away from negativity
- Greater chances of getting credit/loan
Avoid paying fines/interest
One of the main and most obvious reasons for paying bills on time is, without a doubt, to avoid late payment fines and interest — factors that easily cause people to lose control over their financial lives .
Over time, fines and interest can reach very high amounts, even higher than the initial value of the debt. As an example, we can cite a person who pays R$100 in interest every month. In 50 years, this amount could yield almost R$4 million, considering interest of 1% per month.
Although paying bills on time does not count as a direct saving, it is important to consider that interest on late payments or revolving credit is the highest, therefore, it generates expenses that were not initially foreseen.
Stay away from negativity
By paying your bills on time, you keep your name free of any negative credit ratings, which represents a great financial relief.
This factor means you have credit in the market — which increases your credit score and makes it easier to make higher-value purchases.
Furthermore, by having your name free of restrictions, you avoid calls from creditors and telemarketing companies that specialize in debt collection. This means you can carry out your daily activities without being interrupted by calls reminding you that your bills are overdue.
Greater chances of getting credit/loan
This has been observed previously: with one’s name bearing no negative credit, it follows that the possibility of getting credit or a loan rises astronomically. But for this to be consummated, there is a need to track one’s expenses as not to miss any payments.
Plus, it should be realized that one cannot even seek to have their name removed from the bad list and thereby perpetuate a vicious circle of incurring debts by taking more loans as credit is given.
Therefore, to avoid such a situation, one should be aware of all expenditures and incur debts that can be repaid.
What happens if I don’t pay everything on time?
If you’re unable to pay on time, different charges can be brought against you, and your name could end up in the negatives. You would then need financial planning.
To do so, it is best to pay off all debts as soon as you receive your payment. Furthermore, it is advisable to use the remaining balance only after fulfilling all your obligations, thus avoiding paying interest and fines, which can considerably increase your bills.
However, you may be wondering what to do in cases where it is absolutely impossible to pay all your debts on time, right? In this case, you must first take a look at your accounts.
In each account, you would have a different penalty for being late, depending on which one you have, and sometimes the interest rates are bigger than others. In this case, if you cannot pay all your accounts, the best step to take is to pay those with high interest rates-that have a big loss- first.
Understand the interest charged on late payments
As we have seen, each type of account has different interest rates and, thinking about helping you in times when you need to prioritize the payment of a certain bill due to lack of money, we will present the types of charges for the main bills.
In general, rental contracts, for example, usually offer discounts for paying on time. Therefore, in cases where there is a delay, it is common to have to pay much higher amounts, and it is better to prioritize this type of payment.
Another payment that, in general, tends to have very high charges is the credit card, since there is the incidence of the so-called revolving credit, therefore it is ideal to prioritize the payment of the entire invoice.
In the case of electricity bills, according to (National Electric Energy Agency), which regulates concessionaires in the sector, there is a 2% fine and 1% interest per month on overdue bills.
Have your finances under control!
You could have seen, however, that there are several advantages of timely payments because you avoid interest and fines while keeping your name clean. If you still wonder how you can keep your finance under control, we’ll give you more tips.
In addition to, as we have seen, prioritizing the accounts that have the highest interest rates when necessary, another important point for maintaining payment discipline is to use automatic debit so as not to miss the due date of bills due to forgetfulness.