Sure it’s a cliche, but it bears repeating: “There’s too much month at the end of my money. “
Not everyone is a financial wizard and not everyone is independently wealthy. Budgeting is difficult and surprises await those not ready with a three-month cushion of emergency cash.
Of course, some may think, “What’s the worst that could happen if I don’t pay my bills?” The comprehensive answer to that simple question is “Well, it depends. “
It is inconvenient.
When it comes to utilities, shut-offs are the first line of defense against non-payment. Very few people like to do without electricity, natural gas, water, etc. So usually getting them shut off is incentive enough not to get behind.
Taking time off work to be home for re-connections is not only a pain in the neck, it puts a strain on work life too. Gas companies generally will not re-establish service without someone being there, so that they can take necessary safety precautions.
Eventually, the customer will have to talk to someone about failure to pay. Dealing with bill collectors is not only a hassle, it’s embarrassing. Collections agents are doing their job and do not care about the reason why there was a failure to pay.
It costs more.
Almost any company doing business will charge late fees. Whether it is a percentage or a flat rate, it ends up eating into the budget, making the next month tight on money as well.
Utilities will charge you reconnect fees any time they disconnect service. This can be up to half of the average monthly bill, although most charge a flat rate. Since the customer is over a barrel, they have no choice but to pay it or do without, so it is never cheap. This, of course, is in addition to the late fees already assessed.
Credit card companies and banks will charge higher interest rates. And part of the fine print of almost any credit card agreement says that the interest rate will be raised if paid late X number of times. For some credit issuers, X=1.
If it gets to a point where lawyers are involved, legal fees are not cheap. Not only do the attorneys have to be paid, they have their own unique ways of charging for everything, and nothing is cheap when it comes to lawyers. Don’t forget that court costs and administration fees; plus if the loser in some states have to pay the opposing side’s legal fees as well.
The long-term effects are the most troubling.
Not paying bills affects all aspects of life, from purchase power to ability to lead a normal life.
It will definitely affect the credit rating. Most issuers of credit report to three large credit bureaus; Experian, TransUnion and Equifax. They each generate a score based upon a number of factors that give credit issuers a picture of what they can expect from a potential borrower. Depending on the infractions, it will stay on a credit report for up to seven years. Credit card companies, if they will even issue a card, will charge more interest, higher annual fees.
A bad credit rating makes it harder to get a loan. Planning on buying a house? You’re not going to get a good interest rate if the bank thinks that you’re a bad credit risk. And if you do get approved, you’re going to pay a higher interest rate and carry mortgage insurance longer.
If the bill in question is an auto loan, repossession becomes an issue. So now there’s no way to get to work, and unless they’ve got some really understanding friends, no way to get around to buy groceries and the other mundane tasks made easier with having a vehicle.
The best way to avoid getting into a situation is in planning. Make a budget and stick to it. Plans and priorities change, and when something unexpected like a trip to the emergency room or car repair arise, choices have to be made. Plan for that occurrence, also.