Organizing Your Personal Finance

One of the first things I learned about finance was to always pay my bills on time. It sounds obvious and easy to do, but is actually a little more complicated than most people think. At first, I was going through my mail every day, writing checks, and penciling in a date on the envelope about a week before the due date. On that date, I would put the bills in the mail. It was inefficient, costly and inaccurate, yet I still know many people who do it this way.

The Problems With The Traditional Method

One of the problems with having credit cards is that if you do pay them even one day late, the late payment fees and interest payments can go from zero to over a $100 in an instant. The credit card companies know this, and they do sneaky things like have the payment due on a day they are closed, such as a weekend or a holiday. Bills often arrive only two weeks before they are due, leaving you precious little time to send payment by mail. Incredibly, some banks have even been caught illegally charging late fees even when they received or even cashed them on time.

Fraudulent bank practices aside, there are several ways the traditional bill paying method can go wrong. You can forget to mail the bills on time. The post office can delay or lose your payment. You could be out of town on the day the bill is due to be placed in the mail.

How To Always Pay On Time While Saving Time and Money

For over a decade, I have done my banking with an Internet bank, one of the first to offer electronic bill payment services. It took me a little time to learn, but once I did, I couldn’t remember how I ever got along without it. Today, almost all banks that offer an electronic payment systems, usually one operated by a company called Check Free. When I direct my bank to pay a bill, I chose the date of payment and the amount that it gets paid. I just set it and forget it. There are several ways this saves me time and money. Obviously, I don’t have to purchase checks, or write them. I also don’t have to purchase stamps. Perhaps the best part is that the money stays in my interest checking account until the day it is paid. I am also guaranteed the payment is made on time, regardless of my travel plans or the vagaries of the US Postal Service. Finally, I can easily plan my finances weeks in advance, knowing how much I am paying and on exactly which date it will come out of my account. That is simply impossible when you are physically mailing checks around the country.

Nobody Is Perfect

Unfortunately, no system has ever been created that is entirely foolproof. About once or twice a year, I get a bill that indicates that my payment was not made on time. I then go through my records online to see if I had scheduled the payment correctly. Most of the time, it turns out that I had made a data entry error in the date or amount of the payment. In that case, I am usually able to get the recipient to waive the the late fees as a courtesy. Occasionally, it turns out that the error was the fault of the bill payment system itself. Fortunately, they stand behind their product, and they either resolve the matter with the merchant, or credit me with a complete refund of interest and late fees.

How To Keep Errors To A Minimum

These days, every bank offers an online bill payment system. You can get to know your bank’s system by taking an online tutorial. It will take a few minutes, and will probably be somewhat boring, but the time is well spent learning its features and avoiding mistakes. To reduce your error rate, double check the account number and the address of the payee against your bills when you pay them. If you are paying a large bill, like one of those “12 months same as cash” financing offers, triple check it and pay it a week early.

Reap The Rewards

As we all know, reward cards should only be for people who pay their bills on time and in full every month. Only once I was confident that I had a quick and accurate way of ensuring bill payment, only then was I able to seriously consider the advanced reward maximization techniques that involve holding many different cards for different purposes.