Costly Mistakes to Avoid When Paying Your Bills

Bill paying can be complicated. Some are on auto pay, some come in the mail and some businesses accept only paper checks. Though it seems unfair that little mistakes in these processes can ding your credit scores, it’s true. “Few things in life are as expensive as having crummy credit,” says Matt Schulz, chief credit analyst at Lending Tree. They can mean higher interest rates and annoying fees on credit cards and loans, and cost you the cellphone, apartment, or even job that you want.

Related: Ways to Improve a Bad Credit Score

Missing the due date on a bill often triggers late fees, and those are just the beginning. Since payment history is a factor in your credit score, paying late frequently can hurt.

Related: Ways to Reduce Your Monthly Bills When Money Is Tight

Setting up automatic payments can save you from forgetting to pay a bill, but don’t rely on it 100%. Double check to make sure payments are being sent correctly — especially the first payment, since sometimes it takes a full billing cycle before auto payments kick in. Read the terms carefully.

Related: Ways to Simplify Your Finances

Make a mistake? Call the billing department, credit card company, or your bank and ask for forgiveness. They might reverse late fees or overdraft fees as a one-time courtesy. But you have to ask.

For more great money-saving tips, please sign up for our free newsletters.

Auto pay handles the mechanics of a bill, but letting it all run in the background means you might find later that items you didn’t buy and services you didn’t receive have cost you — something that is particularly common on medical bills. 

Related: Reduce Your Health Care Costs With These Expert Tips for Seniors

Look at account transactions regularly. You might notice that the gym you quit is still billing you, or that a credit card payment didn’t go as scheduled. “Once a week, or once a month, go to the card-issuer’s site and make sure your bill is paid,” Schulz says.

If you are charged for items you didn’t get or there was a problem with your bill, call and point it out. If you don’t, you’re shelling out more than you need to.

Some companies offer a couple days of leeway, others don’t, so don’t assume you have a grace period. “Your best move is not to even think about the grace period, and pay attention to when the bill is due,” Schulz says.

Related: Worst Things About Credit Card Companies

Online bill paying makes life easy, but it’s easy to make a mistake, too. Slow down and make sure you select the right payee from your list. Double check the address and payment amount. Not sending enough money or sending it to the wrong place can result in penalties.

Related: Mistakes to Avoid When Applying for a Personal Loan

When online payments don’t appear to go through, impatience is a problem. Sometimes a system glitches, and pushing the wrong button again can result in paying double — and potential overdraft fees, since twice the expected amount is getting subtracted from an account. Reversing payments isn’t so easy, either.

Related: Reasons for Consumers to Beware of Big Banks

Throwing mail into the recycling bin unopened can be costly. Sometimes merchants change their payment address, or their terms and conditions, and missing the change can result in a missed payment. You might even get lucky and find a refund check in what you thought was junk. Open your mail!

Related: Signs You're Too Frugal

This might be a strategy on the part of a business rather than a mistake the customer makes, but payments made by credit card sometimes come with a 2% to 3% convenience fee. They can add up.

Related: Don't Let These Hidden Fees Catch You By Surprise

“Zero percent loans can be a godsend if people have debt,” Schulz says. But it’s important to understand the rules, deadlines, and fees. Often, if you make a payment even a day late, you can be charged all the interest you would have paid on the loan. That means instead of paying no interest, you’re paying up to 25%.

Related: Credit Card Mistakes You're Probably Making

To avoid unpleasant interest-rate surprises, ask about special financing with retailers or deferred-interest loans. Make sure you understand the terms and get the check in the mail on time. A late payment or a payment that’s even a dollar short can mean owing a high-interest rate going back to the first day of the loan. 

Sometimes credit card debt is inevitable, but the best thing you can do is pay the balance off as soon as you can. “We know that’s not possible for everyone,” Schulz says. Second-best is to make the minimum payment on time every month.

Related: Credit Horror Stories That Will Keep You Up at Night

Money has to be in an account to pay the bills on time each month. Not knowing how much money is coming in and going out each month is a gamble that can turn out badly.

Related: Steps to Creating a Monthly Budget

Keep track of your expenses and account balances — and don’t be afraid to call a company and ask for a lower interest rate. “Eighty percent of people who ask for a lower interest rate on a credit card get it,” Schulz says, and a 5% or 10% reduction can be significant.

Fail to shop around for a good or service, including loans and their interest rates, and you’ll surely wind up paying more than you need to — and maybe more than you can. (If you’re unsure about the different kinds or how interest rates work, sites such as ConsumerFinance.Gov offer quick help.)

Related: 100 Top Money-Saving Tips

Interest rates are low, so if you’re having trouble meeting your expenses, talk to a nonprofit credit counselor about setting up a payment plan. “Do what you can to knock down credit card debt now while rates are fairly low,” Schulz says.

At least annually, go to a site such as Annualcreditreport.com and check your status for free from all three credit bureaus. Mistakes can hurt your credit and cost you, so report activity that isn’t yours. “You don’t want that dinged by someone else’s mistake,” Schulz says.