Don’t Feed the Alligators

A Personal Finance Blog from a Small-Scale Landlord’s Perspective
Late Fees

Creative Commons License photo figure credit: josh.ev9

The other day I got an email from our cell phone provider indicating that our latest bill was available for viewing online. I logged into our account and found that we were actually a month behind on our payment and now owed two months’ worth. Not a big deal, I thought — until I saw the late fee. My lack of attention to this bill cost us $5. Not a big deal in the grand scheme of things, but $5 here and $5 there can start to add up pretty quickly, especially when you consider what we might otherwise be doing with that money.

How did this happen? Every month I get an email from the cell phone provider reminding me that our bill is due soon. This is a great first step in making sure that bills get paid on time, and I applaud the cell phone provider for offering this service — especially when the upside of a late payment is an additional fee for them. I get similar reminders from a number of our other creditors, such as our mortgage company. Somehow, though, last month’s cell phone bill slipped through the cracks. And it’s not the first time that this has happened.

Most of our bills are paid via automatic billpay through our bank. This works great for bills that have the same payment due every month. However, for the last year we have been paying for everything that we can (that’s in our spending plan of course) on our Chase Freedom cash rewards card. This card offers 1% cash back on all purchases as well as 3% cash back on things like groceries, fast food, and fuel purchases. We can’t use this card for most of our big bills like our mortgage, car, and student loans, unfortunately, but we can use it on a lot of the small stuff like cell phones, satellite TV, Netflix, periodic insurance payments, etc.

Make it Automatic. David Bach’s book The Automatic Millionaire outlines the case for automating your finances as much as possible. We generally subscribe to this philosophy, but there are a few loose ends. While paying this overdue bill, I noticed an option to set up an automatic payment. For bills that have irregular payments due each month, I generally don’t like to have them get paid automatically because I like to review the bill to make sure that all the charges are correct. However, if the choice is between reviewing something that is correct the vast majority of the time for the cost of a $5 late fee, or paying on time, I’ll choose the on time option. Besides, I still have the option of reviewing the bill and clearing things up after the fact. So I went ahead and set up an automatic payment for this bill. I have done the same for many of my other accounts, such as satellite TV and Netflix.

The great part about all of this is that I also have an e-bill for my Freedom card through my bank’s billpay function. With the e-bill, I also have three options for automatically paying my credit card bill each month:

  1. A fixed monthly payment — useful for paying down a large balance to get out of debt
  2. A minimum monthly payment — useful when you are paying down other, higher interest credit cards while getting out of debt, or for exploiting a 0% interest on purchases offer (more on that in a future article…)
  3. A payment in full — useful for most people, most of the time

With these options, I can be sure that no matter what our cell phone bill is next month, the bill will get paid on time by our Freedom card, and the Freedom card bill will get paid on time via my bank’s e-bill feature in billpay. Voila! No more late fees.

Have you automated your finances yet? What techniques do you use to be sure that your bills are paid on time?

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