Published in: Credit Cards | Dec. 10, 2019

Report Shows How Consumers Are Getting Better at Paying Bills on Time

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But there's more to the story.

Not paying your bills on time is one of the easiest ways to run up your credit card balance and damage your credit history. One slip-up won't be devastating, but fees and penalty interest charges can add up if it becomes a habit.

Luckily, most credit cards now allow you to set up automatic payments and avoid missing a due date. A recent report from the Consumer Financial Protection Bureau shows that new technologies are helping consumers to improve their credit card payment habits.

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Although consumers are getting better at paying their bills in a timely manner, credit card issuers continue to rack up billions of dollars in late fees each year. So what's going on behind the scenes?

More credit card users use automatic payments

Once your account has been properly set-up, automatic credit card payments make paying your bill convenient and easy. The automatic payment takes funds from a linked bank account on a recurring basis. That way you can pay off your credit card without making manual monthly payments. Usually, you can set it to make the minimum payment or to pay off your statement in full.

Over the past few years, there has been an uptick in credit card customers using automatic payments. The share of accounts enrolled in automatic payments increased from 11% in 2015 to 16% in 2018.

The increased use of this feature reflects an improvement in consumer habits. Automatic payments are a sure-fire way to avoid unnecessary late fee charges and increase your credit score by building up a history of on-time payments.

Unfortunately, late fees are on the rise

Even though more consumers are enrolled in automatic payments, total revenue from late fees continues to rise. Credit card issuers assessed roughly $13 billion in late fees in 2018 -- $3 billion more than 2015. But the proportion of missed payments has barely changed. 

This boost is down to an increase in the number of credit card accounts, along with a higher charge for each incidence. The maximum fee credit card issuers are allowed to charge for late payments has increased by a few dollars since 2015. They can now charge $28 for the first missed payment and $39 for subsequent missed payments.

Still, it's clear that autopay hasn't resolved the issue of late payments. For some, it may simply be a matter of enrolling so they don't forget to make their monthly payments. For others, though, the problem is that they're coming up short each month. If you don't have the money to pay your credit card bill, enrolling in autopay doesn't make a difference.

How to make sure you never miss a credit card payment

Don't waste your hard-earned money on unnecessary late fees. Start by setting up automatic payments on each of your credit card accounts. Be sure to indicate whether your automatic payment will be the minimum, full balance, or other customized amount each month. You'll also need to keep an eye on your linked bank account balance to ensure you don't go overdrawn.

If you aren't ready to go the automatic payment route, consider making your minimum required payments as soon as you get paid each month -- even if your bill isn't due just yet. This approach guarantees that your bills get paid on time and eliminates the risk of you spending those funds on other purchases throughout the month.

You should build up an emergency fund regardless of how or when you plan to make your credit card payments. Your emergency fund can be used for more than just unexpected expenses. It can also act as a safety net for your credit card payment in case you run out of money before your due date. With an emergency fund stashed in a high interest savings account, you can tap into reserves to cover your credit card payment whenever necessary. Just remember to rebuild your emergency fund after you dip into it so you'll have access to funds if another unexpected expense comes up.

By making your credit card payment a priority, you'll save money and protect your credit score. The autopay feature offered by most credit card companies can help you to keep your bill-pay on track. 

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