Most Americans Making $75K or Less Have Overdue Bills: 2 Ways This Wrecks Your Finances
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While having overdue bills may be the norm, this behavior has both short- and long-term consequences. Before skipping a payment, here's what you need to know about how this can affect your finances.
Missing a bill payment can add to the amount of money that you owe in the form of added fees and additional interest.
'In the short term, you are going to be wasting money that you could be saving by paying late fees and potentially interest on those overdue bills,' said Bobbi Rebell, CFP and personal finance expert at BadCredit.org. 'In fact, some credit card companies increase your interest rate with a late bill.'
It can also impact your mental health.
'Having constant overdue bills and feeling like you are playing catch-up takes a huge toll on mental health and may literally keep you up at night,' Rebell said. 'That's a terrible way to live.'
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Having consistent overdue bills can negatively impact your credit score.
'Over the long term, not only can it severely impact your credit score, it can also drag down your ability to accomplish your financial goals,' Rebell said. 'Once a bill is more than 30 days overdue it can be reported to the credit agencies. That lower score will hurt your ability to get loans — including mortgages — and if you do get approved, it can mean you are getting less favorable terms.'
When you have overdue bills, it can feel impossible to catch up, but with proper planning it's possible to get back on track. The first step is determining which bills to pay first.
'Understand that not all bills are of equal importance,' Rebell said. 'Take the time to go through them and understand the consequences of paying each of them late. For example, some bills do not have any financial consequences for 30, 60 and even 90 days.
'Some, like credit cards, have serious financial consequences in that if you don't pay on time, you not only get hit with late fees, you also will pay interest on the overdue amount, and usually on any current charges as well,' she continued. 'That's an expensive delay!'
You also need to consider the impact of each unpaid bill.
'For example, paying a utility late could result in a loss of service at some point,' Rebell said. 'Use this information to prioritize which bills to pay if you have to make that decision.'
Next, call your lender or providers and see if there is any room for negotiation.
'In some cases, for example with some medical bills, you can negotiate a lower balance or a deferred payment schedule,' Rebell said. 'Credit card companies will sometimes let you adjust the payment date, so be sure to ask. Also with some bills, such as mortgages, the due date may be the first of the month, but there is no penalty as long as you pay it by the 15th.'
If you are consistently struggling with overdue bills, you may need to reassess your overall budget.
'That might mean cutting back on anything you can, even if it is just until you clear your bills,' Rebell said. 'It also might mean asking for a raise, if that is possible, or taking on some side hustle work to boost your income. At the end of the day, you have to make the math work by changing the numbers rather than just trying to keep up in an exhausting effort to pay unaffordable bills.'
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