Listen instead

Is it better to keep the money I owe as bills in my account for as long as possible so I can gain more interest on that money, or should I pay my bills as soon as I receive them?

I asked myself this question a lot until I sat down one day and did the math. Let’s take a look:

Let’s say you have a bill for $270 for water in your home (the amount could be for anything). This bill comes to you in the mail or electronically. You get it on Dec 3rd, but it isn’t due until Dec 18th. Furthermore, let’s assume you have the $270 in your account now and could safely pay it off on Dec 3rd if you wanted without going in the red in the rest of the month.

Your bank account is probably not getting a great interest rate – but let’s assume you are getting 2.5% interest. For the 15 days between Dec 18th and Dec 3rd, you’d get only $0.28 interest. Over a year, this would add up to a whopping $3.32! It’s my opinion that for this small amount it’s hardly worth the time you will spend trying to coordinate the location of the bill and the day it needs to be paid without incurring a late penalty.

A better option is to pay it off as soon as you can to get it out of the way and not have to worry about it. You should leave your predetermined minimum balance in your account in case of an emergency, so the payment of the bill can be flexible depending on your needs.

Worse, if you are like me and have opted for an account which covers some things like unlimited interact transactions and unlimited check writing, but it pays no interest at all – then the choice is obvious…. pay off that bill as soon as you can afford to!

What strategy has worked for you in paying your bills? Right away or delay?