Save money by paying sooner

Aug 25, 2023 10:37AM ● By Arthur Vidro

Sometimes you can save money by paying your bills quickly.

Most of us know that if we make larger payments on our loans or credit card bills, we’ll end up sending less money to the lender/card issuer. It is a simple matter of limiting the interest that grows on the debt. The longer you let the past-due amount build, the greater the interest owed.

But there are other, smaller ways to save by paying quickly.

When we lived on the East Coast, our heating-oil company gave a discount (10 cents a gallon) if payment was made within 10 days of the oil delivery. So we paid it promptly. Our hospital sends out bills with two prices—one for the total due and the other for a reduced total due if payment is made within a month. It amounts to a 15% discount, no matter how large or small the bill. I pay promptly whenever it means a discount.

You can also sometimes save via pre-payment.

After many years of using the same pest company to make quarterly visits and respond to pest emergencies, I inquired about a pre-payment option. They knock off about 5% of the price when I pay for a year’s worth of services in advance.

Earlier this year I received a notice from my trash-collecting company announcing that it too offered an option to pre-pay for a full year and save 10%.

Now 5-10 percent might not sound like much, but a savings is a savings. And if you’re happy with the service a company provides, it makes sense to take advantage of the option.

Nowadays, it’s hard enough to get 1% interest from a bank, so if you can save 5-10% by pre-paying, that’s not so bad.

Of course, if you’re living paycheck to paycheck, this probably won’t happen. You need money tucked away in savings. The reward for pre-paying is saving some money, plus no longer receiving monthly or quarterly bills for the period in question.

However, there are risks to consider. First, you’re locking yourself into service with a company for the long-term, so you should be confident they will continue to provide good service. Do not pre-pay for services from a company that is a stranger to you or whose service has left you less than fully satisfied.

Another risk is if the company goes bankrupt before providing all the services you’ve paid for, you will be one of many creditors seeking repayment. There is a chance you will lose everything you’ve spent without receiving the paid-for service.

Plus you need to be vigilant and be sure the promised discounts are actually applied. It’s important to open your bills and statements and make sure the amount reflected is correct.

More recently, our trash company raised its rates, but because we’ve pre-paid, the newer rates don’t apply to us—at least not yet. Pre-paying delays when rate increases apply.

Yes, paying quickly or in advance certainly has its advantages.