How to pay bills

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Paying bills is rarely considered a fun thing to do, but getting organised and learning how to pay bills on time is important. Falling behind on paying your bills can have a detrimental impact on your credit score and affect your financial future.

Why it’s important to pay your bills on time

Paying bills on time helps you to take control of your finances. It can be overwhelming at first, but finding a good schedule is essential to keep on top of bills that come through your door.

From phone bills to utilities, rent and mortgage payments, subscriptions, and insurance; there can be a lot to think about. The last thing you want is to fall behind on your bills as this can impact your financial status, which can make it difficult when you need to borrow money for a mortgage or new car.

Here are some reasons why learning how to pay your bills is important:

Credit score

Your credit score is the heartbeat of your financial health. This three digit number is what banks and other financial institutions use to check how reliable you are when it comes to lending money.

A high credit score paves the way for larger loans, more competitive interest rates and a boost to your financial opportunities. A low score may make it difficult to borrow money. When you are late or when you skip bill payments, this can be taken into account and will drag your credit score down.

Better interest rates

Being timely with bills and having a strong credit score may also earn you better interest rates. Late payments can lose you money in the long run as some credit card companies can hike up interest rates if you have a history of missed payments.

Check the small print on your bills as you can get charged daily interest rates, which means the sooner you pay, the better position you may be in.

How to get organised and pay your bills

The main way to get on top of your bill payments is to make sure that you are organised. Piles of papers, unopened envelopes, lost letters and no real record or schedule of what is due and when, can be a disaster.

Getting your paperwork in order can help you understand how much is due, for what and when. The first thing to do is to organise your bills. Have a dedicated folder for paper bills or if you receive your bills in digital format, you can even create a computer file to save them in.

1. Set a time to look over bills

Pick one afternoon a month (or per quarter period if this is how you pay) and take the time to look over your bills. Having a system where you are continually aware of your current financial situation can stop bills from piling up or getting lost.

Take an afternoon and look over your bills, crunch some numbers and cross reference bills with the amounts coming out of your bank account. Not only will this keep you aware and accountable, but it also means that you’re more likely to spot any mistakes from your provider.

2. Pick a payment method that works for you

Organising your papers and checking your cash flow is an important part of the process, but not as important as actually paying your bills. Picking a payment method that works for you is a personal decision. You want to make sure that the method you choose is as easy as possible as the fewer steps involved, the swifter it will be.

Here are a few popular methods and the best ways to pay bills:

a. Set up a direct debit

Direct debit is one of the best ways to pay your bills. With a direct debit, the amount due will be automatically taken from your current account. While it may take a little effort to set up at first, there will be minimal effort involved going forward. If you are in a house share and splitting the cost of bills, a direct debit normally comes out of one account so one person will need to be appointed to take control of this.

b. Pay online

Many companies offer the opportunity to pay your bills online or over the phone. This is a quick and easy payment method as long as you have internet access. You can also register your card details, so you don’t need to type in your details every time.

c. Pay in the post office

You can normally take bills into the Post Office and pay them with cash or card. This can be a good option if you want to pay your bills with cash, but it does require a trip to the Post Office.

d. Use prepayment meters

Some companies offer gas and electric on prepayment, or pay-as-you-go meters. Phone packages can also be sold on a pay-as-you-go basis. If you struggle with making timely payments, this may be a good solution for making sure you don’t slide into debt. The downside with prepayment meters is that you may not have access to gas and electricity if you don’t have credit.

3. Face your financial struggles head on

Another essential element of keeping on top of your bills is to make sure that you face any late payments or struggles head on. If you’re already in debt or struggling to make timely payments, you should contact the people you owe money to as soon as you possibly can.

There may be an option to make smaller payments over a longer period of time. You can also reach out to debt advice companies or Citizens Advice if you find yourself struggling to clear debt.

How to prevent late payments

There are a few steps you can take to help prevent late payments, such as consolidating bills or paying in advance.

Here are a few ways you can help to prevent late payments:

1. Consider consolidation

If you use multiple services from one provider, you can ask them to consolidate those services into one bill payment. For example, this can work if you have a company that provides your mobile phone, internet, and television services or if you have a company that provides both gas and electricity. Having one bill to pay instead of several can simplify the process.

2. Ask for email reminders/bills

Going paperless can help you to get on top of bills as you won’t be relying on postal services to get the reminders to you. By switching to email bills or bill reminders, you can pay promptly using links that take you directly to your account (if you are already an online user).

3. Pay in advance

If you’re in a good financial position, you may want to pay your bills in advance. This can help you to accrue credit with your providers, which means if you do happen to miss a bill or two in the future, you won’t suffer the consequences.

Taking control of your money

Paying your bills on time should be a priority. Not only does it help you to build up a good credit score, but it can also bring some satisfaction knowing that you are in control of your own life.

By adding payments to your calendar, keeping all your records in one place, picking an easy (and automatic) payment method, and signing up for email reminders, you are giving yourself the very best chance to pay your bills on time.

Once you’ve got control of your bills, you can start to work on building your savings and even your pension contributions.

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