Americans are skittish about paying their bills — and many of them wind up paying those bills late.
Data from a recent Aite Group study shows that 46% of Americans pay their bills late, while 23% percent pay within the first 30 days after the due date; 18% pay beyond 30 days after the due date, and 5% never pay on time.
Financial consumers who pay one particular bill late – credit cards – are especially courting trouble. Besides fees and penalties (which can include higher card interest rates), late payers will also likely see their credit score take a downward hit.
“Late payments can be really detrimental to your credit score,” says Michael Broughton, co-founder and chief executive officer at Perch, a fintech mobile application company. “The amount of damage a late payment can do on your credit isn’t based entirely on what the payment is or size, but more so how long it takes to pay off the late expense. The later the payment, the worse the penalty.”Late credit card payments can stay on your credit report for seven years, according to Broughton. “That ends up impacting your credit card applications,” he notes.
Getting back on track
The first step in getting a grip on late payments and moving toward credit card application approval is paying your bills on time and avoiding late fees.
Credible is a great platform to review credit cards when you begin applying for plastic. You can instantly compare all types of credit cards, from travel rewards to balance transfer cards all in one place – and find the best credit for you in the process.
“To avoid credit card late fees, be sure to know the billing cycle time frame and when your payment is due,” says Daniel Rodriguez, director of operations at Hill Wealth Strategies, in Richmond, Va.
Another good strategy to avoid paying credit card bills late is to automate the payment process.
“Establish automatic payments a few days before the payment is due,” Rodriguez says. “This way, your financial institution’s online banking system will automatically withdraw the amount you set and when. You can make this payment structure as a recurring event or a one-time payment, depending upon your monthly credit card balance.”
Boost your credit score before applying for a credit card
To improve a credit score before trying for a new credit card, Rodriguez points to four easy strategies he shares with his clients:
- Pay your bills on time. “That includes everything from utilities to credit cards,” he says.
- Pay off credit card debt at the end of each month’s billing cycle. “If you’re unable to pay it off every month, then try not to have a high balance relative to your credit limit,” Rodriguez adds. “I recommend no more…