Managing Your Bills
You’re making progress on your second month of the game – how’s your Checking Account holding up?
Just like the real world, there is a lot of uncertainty with your budget. You might have been able to pay for every bill directly with your Debit Card so far, but you will find yourself starting to get short on cash (especially if you’ve been serious about hitting your Savings Goals). This is where the “Art of Managing Bills” comes into play!
Deferring Payment
Every bill is due in the second half of the month was issued – do not be shy about “Paying Later” if you don’t immediately have enough cash. You can always dip into your savings account if you ABSOLUTELY need to, but that really should be a last resort. If you are faced with a short-term cash crunch, this is where your ability to manage your late fees and interest rates come into play.
Late Fees vs Interest
If you are late on you bill payments, you will receive an automatic 10% penalty on the outstanding balance. This is a pretty big hit, and can add up fast.
On the other hand, your credit card only charges a 0.05% daily interest rate. This means if you don’t have the cash to fully pay off a bill, it will usually be cheaper to pay the interest on the credit card (in the short term) than the late fee on the bill.
Fees, Fines and More
That isn’t quite the end of the story! Your credit card company also charges you a $25 “Finance Charge” if you don’t fully pay off your credit card bill every month. This can make the math more complicated – and a headache is the last thing you need when you’re already low on cash!
The Bottom Line – Pay Yourself First
Your first priority is making sure you can hit your savings goals – regardless of which bills you can pay. While you can withdraw money from your savings account if needed to pay off your bills, this should be left as an absolute last resort.
If you want to make things easy, you will usually be safe putting most of your bills on your credit card – then you only have one BIG bill to worry about each month, with just one late fee and interest rate. If you find that you can’t fully pay off your credit card when the bill comes due, then you might need to re-evaluate your savings strategy and set a lower savings goal next month – otherwise you will start to quickly accumulate interest charges, and your credit score will start to suffer. This might not be the best way to go if you want to improve your Credit Score, but it can help cover short-term gaps.