Pay Bills Early? Only If You Want to Save Money
It's no surprise that being prompt with your bill payments saves you from late charges and frees up your income early in the month. But there are other benefits that may not be so apparent. Whether it's debt or utilities, getting your bills out of the way early can pay off even more than you think. (See also: 4 Sneaky Charges on Your Monthly Bills)
In addition to avoiding penalties, you can snag some pretty good discounts by paying bills before they're due. For example, the Light Department of Holden, Massachusetts offers a 10% discount if customers pay within 15 days of the billing date. Similarly, residents in Alamo, Texas receive up to 3% off of their property tax bill if they pay early enough. Many doctors, hospitals, and other healthcare providers also give discounts if you pay at the time of service or within a certain time period, often 30 days. Check with your service providers and government agencies to determine if they offer prompt-pay discounts. Even if they don't advertise any, it can't hurt to ask.
You're likely aware that you can save yourself a nice chunk of change in interest by paying off things like car loans and mortgages early. But you may not realize this principle applies to your monthly credit card bill, too. Simply paying the bill by the due date will help you avoid penalties and fees, but you could still be costing yourself money by not paying as soon as possible.
Interest on credit card balance accrues and compounds daily, meaning the interest charges are applied to your balance every day and are based on the original balance plus the interest that accumulated the previous day. So with a $1000 starting balance and 10% APR (which equals 0.027 percent in daily interest), you'll pay $1,000.27 the first day, $1,000.54 the second day, $1,000.81 the third day and so on. Most credit card companies also use the average daily balance method to calculate your bill, which adds each day's balance together and then divides that amount by the number of days are in the billing cycle. (See also: Best Low Interest Rate Credit Cards)
All of these factors combine to create a situation where every day that passes in your billing cycle costs you more money in interest. This becomes especially true with larger balances and when you're only paying the minimum every month. Although it may not be big money, making your credit card bill payment as soon as possible definitely decreases the amount you pay now and in the long term. That's extra money you can use to fund your savings and investments, or to just enjoy an occasional night out.
Better Health and Peace of Mind
Beyond the constant worry, sleepless nights, and other anxiety-induced mental health issues associated with unpaid bills, they can be the root of physical health problems, too. People experience a phenomenon called "debt stress" when they owe money. According to a survey conducted by the Associated Press and AOL, high amounts of this kind of stress can make you more likely to suffer from headaches, back and neck pain, digestive issues, fatigue, and even heart attacks. (See also: How Debt Can Lead to Depression)
Even if you've got your bills under control and aren't worried about being able to pay, those pesky little pangs of anxiety you experience throughout the day when you remember that a bill remains unpaid can take their toll as well. Studies have shown that even little things like thinking about making a bill payment can be a detriment to both your current frame of mind and your long term mood, especially if you don't deal with minor stressors well.
Paying your bills sooner rather than later relieves you of this tension before it has a chance to ruin your day or cause more serious problems with your physical and mental health. Getting bills paid early can also give you a boost in your immediate emotional well-being, as you get to check a task off of your mental — or actual — to-do list. (See also: 15 Small Healthy Habits)
Making Sure You're Early
Don't wait for your bill to arrive in the mail. If possible, make the payment on the first day of the new billing cycle by accessing your account online or calling customer service. You may also be able to set up bill payments through your bank that sends out your bill money to the appropriate party automatically every month. You can instruct your bank to send the funds for different bills on specific dates, ensuring each bill is paid early.
Any benefits of paying bills early I've missed? Hurry up and share them in comments!