How to Get Rid of and Avoid Late Fees
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Here’s a quiz — other than a catastrophic financial event, like a bankruptcy or foreclosure, what financial activity is most damaging to your credit score?
If you chose, “Paying your bills late,” you’re right. Of the five main factors that impact your credit score, your on-time payment record carries the most weight. Of course, paying late doesn’t just dent your credit score, it dents your wallet in the form of late fees.
The best way to get rid of late fees is to never incur them in the first place. Here’s your guide to building an impenetrable late fee avoidance system. (See also: 6 Tips to Shrink Your Bills Every Year)
Pay Right Away
Do you have a stack of bills sitting on your desk or kitchen counter? Are they at least stacked with the one that needs to be paid the soonest on top? Even so, to avoid late fees, get in the habit of paying your bills the day they arrive. Sure, you’ll lose “the float,” the time between the arrival of the bill and the due date when your money could be sitting in your interest-bearing checking account racking up all that .01% interest. But getting slammed with a late fee, typically $25-$39, will wipe out about 13 lifetimes of earnings at that rate.
If you’re still paying bills by check, consider switching to electronic payments, which arrive faster and never get lost in the mail.
The most sure-fire way to avoid late fees is to automate your bill payments. Just about any monthly bill can be paid automatically. Whether you should do so is partly a matter of whether you trust that the right amount will be billed each month.
We pay our mortgage, health insurance, and some of our utilities automatically. However, we take a manual approach to paying our phone and credit card bills online, preferring to check those bills more closely for accuracy before clicking the “pay” button.
Ask for Reminders
No matter how you pay, sign up for e-mail and/or text reminders about upcoming bills. Most companies that you spend money with on a regular basis offer electronic reminders. Since we use Mint.com, which also sends notifications of upcoming bill due dates, we get two electronic reminders for most of our bills.
One of the reasons why air travel is so safe these days is because of redundant systems. If one flight control computer system fails, there’s another one to automatically take its place.
You can build redundancy into your on-time bill-pay system as well by putting reminders in your calendar. Most electronic calendars allow you to set up recurring events.
If one of your credit card bills is due on the 11th of every month, you can set a reminder one time and have it show up on your calendar every month on the same day. Of course, set the reminder for at least a few days before the due date to make sure the bill gets paid on time.
I use iCal on my Mac. To set a recurring reminder, just choose New Event from the File menu and where it says, “repeat,” choose “monthly.” If you use Google Calendar, hit “Create,” add an “Event,” click the “Repeat” box, and fill in the details.
I also use different colors for different activities in my electronic calendar, which makes the bill due dates really stand out.
And remember, it isn’t just credit card companies that dole out late fees. Insurance companies, libraries, video rental companies, and many others will slap you with a fee if you pay your bill late or return their stuff late. So, put all of your due dates in your calendar.
If a Late Fee Happens to You
If somehow a bill slips through your impenetrable late fee avoidance system and you incur a late fee, call the company that hit you with the penalty and plead for forgiveness. If you’ve been a customer for a while and have had a clean record up to now, you stand a good chance of getting the fee wiped off your bill. However, if at first you don’t succeed, ask to speak to a customer service supervisor. Be super kind, accept responsibility, and let them know what steps you’ve taken to avoid paying late ever again (see above steps).
What other steps do you take to avoid late fees?