Most bills come on a monthly basis. For this reason, many people intuitively think paying bills once a month is the best course of action. But this isn’t necessarily true for everyone. Consider whether it’s better to pay bills weekly or monthly for your specific situation.
Do You Need to Lower Your Credit Utilization Ratio?
Your credit utilization ratio is one of the top factors that go into determining your overall credit score. If this is news to you, it’s a good idea to take the time to understand what credit utilization is and how it affects your credit. And furthermore, you should determine if changing your bill payment schedule might impact your credit utilization.
Of all the factors that go into your FICO Score, credit utilization (sometimes referred to as amounts owed), is the second-highest factor by weight—coming in at 30 percent of your overall score calculation. But what is this, and why does it matter?
Your credit utilization is simply the amount you owe versus the total amount you’re allowed to borrow on all of your credit lines. As a rule of thumb, you generally want to keep the amount you owe under 30 percent of your limit. Going over this can start to negatively affect your credit.
You might want to think about how making extra payments on a weekly basis could help you lower your overall credit utilization, as making more than one payment throughout the month can sometimes help with this. Furthermore, making more frequent payments can allow you to pay down your balance to avoid interest, without running the risk of overdrawing your checking account by making lump payments.
When Are Your Bills Due?
The time of the month you have to pay your bills will make a difference in terms of optimizing your payment schedule. While certain things are always due on the last or first day of the month, this isn’t the case will all bills. For instance, most credit cards will have a payment due that doesn’t align with the turning of the month.
If you’re only paying your bills on one day each month, you need to make sure you’re not unintentionally paying some of your bills late. It’s fine to pay early, assuming you already know the amount you owe, but being late will typically lead to you having to pay fees, which can really add up over time. Furthermore, with credit cards and other kinds of revolving balances, you accumulate interest on accounts where the balance isn’t paid in full each month. You’ll be best off if you’re able to pay down as much as possible as opposed to just putting forward the minimum. Otherwise, you can fall into a cycle of spiraling interest.
What Is Your Pay Schedule?
When and how you get paid can also make a difference in what makes the most sense for you—whether it’s paying bills on a weekly or monthly schedule. If you only get paid once a month, you might not want to be making payments at a time when your checking account is low on funds. Planning your bill payment around when you typically receive your primary income can lead to a better plan for your specific situation.
Can You Hold Yourself Accountable on a Monthly Budget?
Another thing to keep in mind when deciding between a weekly and monthly bill payment plan is if a monthly budget is realistic for you. Budgeting is beneficial for all people—but is essential for those who are worried about being able to pay their bills. Typically, consumer budgeting is thought of as a monthly ordeal. This, however, isn’t the best option for everyone. If you’re struggling to keep to a monthly budget, it might be best to switch to a weekly one.
Budgeting by the week allows you to get more granular with the details of how you spend and save your money. It can also let you get more specific about when it’s best for you to pay your bills, even if this means doing a few each week.
Paying bills isn’t fun for anyone. But it can be made much less stressful and cumbersome when you find a method that works for you. Consider whether paying bills on a monthly or weekly schedule is better for your needs.
