Last week I popped into the Optus store during a late-night-shopping session to organise SIM cards for my children’s tablets. I was doing this so they can stay connected during long drives.
When I asked why I would be rejected for an extra $30 charge per month on my already exorbitant phone bill, I was told it’s because I had failed to pay my phone bill on time, “one too many times”.
Okay, so sometimes I pay it a week after the due date, sometimes I pay it a few weeks after the due date, but I always pay it. I’ve never been disconnected.
So why the harsh treatment?
It turns out, if you’re late paying your phone, electricity or water bill, it will be noted down on a big scary system that all potential creditors can access. The system helps them decide whether you are financially responsible or not.
The change came into force in March of 2014 and well, I sort of forgot about it.
MM Confessions: The fashion items we’ve blown too much money on.
Yes, that”s right. I forgot about it and I continued my usual semi-organised financial habit whereby I stick to a strict budget 80% of the time, sometimes forgetting to pay bills for a couple of weeks only to be reminded by a scary phone call or a scary letter.
Grown ups just can’t function like this anymore.
It’s never been more important to PAY YOUR BILLS ON TIME, than it is now, for the following reasons:
1. Australia’s credit reporting practices
As I mentioned, Australia changed its system in March of 2014, meaning that instead of credit inquiries focusing on credit denials and multiple loan inquiries, now assessments are made based on how well you have serviced past and existing credit.
Apparently phone accounts qualify as “existing credit”. In fact, any money you owe qualifies as a credit account.
2. Late fees make your bills even less affordable
Most companies will stick you with a late fee if you fail to pay your bills on time. Two weeks ago, when I called Optus to ask for an extension they said I’d be charged a $15 late fee which they eventually wavered – thank you – but late fees apply to so many bills including utilities, credit cards, car loans and mortgage accounts.
MoneyBasicsU states that consumers can be slugged a late fee even if they are one day late with their payment,. This, more than anything, means it’s important create a bill payment schedule and stick to it. “The late fee is what really can dig deep into your budget or cash reserves. Even if you are one day late – ZING!! – you’re charged a late fee.”
How to pay your bills on time:
Do a budget
Stick to your budget
Keep a copy of it with you at all times
Automate as many payments as you can
Consider paying money weekly towards larger bills
Reduce your usage
3. So, you want to buy a home
It’s already hard enough to afford to buy property but if you have problems with your credit report, banks are likely to charge you a higher interest rate than customers who pay their bills on time, making home ownership even less affordable than it already is. (You didn’t think it was possible, did you?)
MoneySmart states that paying bills on time is one way to strengthen your financial position ahead of a house purchase and it’s equally important is to show a history of regular savings. “A history of regular savings in your bank account and a solid track record of employment will make it easier for you to get a home loan.”
4. Even rentals are affected
If you have been late paying your rent, even by a couple of days, your agent may not be willing to write you a letter of recommendation to assist in securing a future rental accommodation. And not just property rentals. Appliance rentals and car rentals are also taken into account by future creditors.
MoneySmart states that it’s often better to save up for the item than rent it, which will also ensure you have one less credit check on your file, strengthening your financial position. “The payments you make under a consumer lease might seem small compared to the cost of buying the item, but when you add up the total cost of renting, it is much cheaper to buy it instead.”
5. Once it becomes a habit, it will stick.
By respecting each and every bill (and the corresponding due dates) you are exercising discipline when it comes to managing your personal finances. This places you in a better position to manage larger bills, and bigger responsibilities such as mortgages and children's school fees, when the time comes.