When was the last time you were slapped with a $40 penalty for missing a bill payment or because you were unable to put together the full amount? All it takes to be penalized is falling a dime too short or being a second too late. Perhaps you were only $5 away to make the full payment – $40 is a big price to pay for being short only $5. Or you were just preoccupied with life’s responsibilities causing you to miss the due date. It happens to the best of us.
The reality is nearly 1 in 4 US adults admit they are unable to pay all of their bills on time. In fact, many employees in their 20s and early 30s struggle to pay their bills within the due date so much so that 25% of millennials get help from their parents just to pay their phone bills. Making matters worse is that more than 50% millennials are living paycheck to paycheck. The struggle to pay bills on time is far reaching.
At first instance a $40 late fee may not sound a lot. But if you look at it from the perspective of nearly 100M American workers who are living a financially stressed life, nearly hand to mouth, it paints a different picture. What’s more is that more than half of Americans do not have even $500 in savings. Now imagine if you were one of these financially distressed workers – how would it feel to get hit by a late fee nearly 10% of your savings?
The cost of being late
Being late or missing a payment altogether can have a multilayered impact.
The first financial impact is the obvious dollar value of the penalty itself which can range anywhere from $25 to $40 for utilities, overdrafts, not sufficient funds or late credit card payments. The penalty may increase if it becomes a recurring habit. Paying your rent late can have a greater financial impact – usually the penalty is within 5% of the rent value. In either case, it’s a sizeable portion of a monthly budget.
If it’s a credit card payment which is late then you risk an increase in the interest rate. Think of it as a larger fine for the future should you be unable to make the minimum amount or miss the payment. Depending on the frequency of the late payments and the severity of the credit policy, it can damage your credit rating.
A hit on your credit score has perhaps the most lasting impact. A low credit score can put you in a weak bargaining position should you ever apply for a line of credit, buy insurance or mortgage a house. It can take a few years to repair your credit score.
There is also the psychological and physical stress you suffer knowing that a due date is approaching and not having the money in hand or time to fulfil it. And it is also quite stressful being hit with an unexpected penalty or overdraft fee as a result. This type of stress can cause headaches, stomach ulcers and heart problems which can cause you to underperform at work. In 2016, 25% of American workers admitted to not meeting routine monthly expenses, which included bills. 46% of those who are distracted at work due to their financial obligations spend at least 3 hours per week worrying about finances. That is 3 hours of productivity wasted thereby hurting company profitability.
The financial repercussion of not paying a bill on time simply because you couldn’t put together the full amount or weren’t fast enough is unforgiving – the impact has a multiplier effect on the body and the economy. It is much like an unquestionable tax levied by the system as a financial punishment for being a dime too short or a second too late. Each late fee or penalty chips away at the proverbial financial grounding of an individual. If gone unchecked, it is the same feeling as being trapped in quick sand – one wrong move and you sink deeper.
What you can do to be on time
Sometimes we have too much going on in our lives and easily lose track of time. While being late once in a blue moon is perfectly understandable and usually harmless, letting it become a habit must be avoided. In order to make sure you pay your bills on time as often as possible, here are a few tips.
Text or email reminders
It helps to have someone or something remind you of a financial obligation a few days prior to the deadline. You can set up push notifications on your mobile phone to make sure you don’t miss a deadline.
Consider setting up pre authorized debits from your account. This way you can afford to forget the due date knowing your bank will send the payment to the biller. However, be warn as you could be hit with an overdraft fee if there are insufficient funds in your account.
Select easy payment dates
Some utility companies allow you to select a due date of your choice. This makes it easy to remember if you group dues together. Setting your lucky number as the due date could also help, assuming it’s less than 31.
Keep a list of expected bills
Another tip to help you stay on top of your dues is keeping a written list of all financial obligations somewhere visible, such as your fridge or your workstation. Keeping a list of payables in sight could greatly increase the chances of fulfilling them.
Switch to online payments
Electronic bill payments are easier and faster than paper billing. With electronic billing you can make the payment anytime and from anywhere. It’s the greener choice.
Request an extension
If you find yourself in a situation where you know you can’t make a payment on time, try calling the relevant department to ask for an extension. Depending on your case and commitment, they may grant you a few extra days as a one-time exception.
What you can do if you don’t have enough
You may come across a situation where you are well aware of the approaching bill payment deadline, but are unable to put together the full amount. Here is what we recommend in such a situation.
Borrow from friends or family
If you find yourself short a few dollars with the due date closing in, try asking your friends or family members to loan you the balance. You could also ask your coworker depending on your relationship with him or her. Try not to make it a habit and be sure to repay whoever you borrow from.
Request your employer for all or a portion of your accrued wages as a salary advance. This should help you gather enough money to pay off the financial obligation. However, if your employer notices this becoming frequent practice you could tarnish your track record.
Sell something on eBay
Look around your room or storage for something you can live without. Consider selling it online to earn a few dollars that may come in handy. The bright side is you get a head start on spring cleaning.
If you cannot make the full amount through your checking account or available cash, consider putting the expense on your credit card. Be sure to pay any outstanding balances as soon as possible to avoid getting penalized by interest.
As an absolute last resort, consider using a payday loan to pay your bill on time. Beware that payday loans come with very high interest rates and aggressive recovery methods. Before you make the decision, compare the loan payback amount (and interest) with the penalty for not paying your bill.
The all in one solution – pay bills with PayActiv
PayActiv has created an award winning financial wellness mobile app that allows enrolled employees to access their earned wages before payday for a flat ATM-like fee. Among other innovative benefits, the app allows employees to use their early wages to pay bills at no extra charge. Employees can add multiple billers and make multiple bill payments from the convenience of the app for no additional fees.
This addresses the ‘dime too short, second too late’ dilemma we discussed earlier. If you find yourself a few dollars short, you can use the PayActiv app to either withdraw the balance as cash from your accrued wages, or pay the full bill amount all in one go through the app. Depending on your employer’s contribution, the fee to access and use accrued wages to pay a bill is between $0 and $5. This is a small price to pay to avoid a late fee penalty, termination of the service or risk damage to your credit history. Furthermore, you can also perform expedited bill payments for no additional cost, provided your vendor or service provider support it.
The app allows you to schedule bill payments 5 days in advance which means you can count on it to pay your bill after you have set up the payment schedule and transaction. This is a non-invasive and safe pre authorized transaction since it only uses funds that are already earned and rightfully yours. What’s more is that if you don’t have access to your smartphone, you can use bill payment feature through PayActiv kiosk (at select locations) or through a web browser on a computer. You just need to make sure your employer is offering PayActiv’s financial wellness solution.
With PayActiv you do not have to worry about looming due dates and can focus on work and give it your 100% making you more productive and efficient. The best part is, you can avoid late payment penalties when you can always pay bills on time with PayActiv.
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