The mail comes and it’s just one bill after another. You look at the pile of bills and feel overwhelmed and exhausted just thinking about it. There’s no possible way you could sort it all right now. Later, you’ll put aside some time to tackle it head on. The only problem is, later is too late. By the time you’ve gotten around to the huge pile of bills, you find that some of them are already past due. Oops!
This hurts you in more ways than one. Not only do you end up having to pay late fees, which is annoying enough, but you also hurt your credit score and cause your interest rates to sky rocket. Some credit card companies have a universal default policy, meaning that if you are late on a payment with any of your creditors, they can raise your interest rate to a default rate, as high as 29.99% or even higher. Just by being late on one bill, you may end up with higher interest rates on ALL of your credit cards.
So, let’s do the math to see how much this could end up costing you. Let’s imagine that you have $5,000 in credit card debt at a decent 12% APR. If you pay the minimum payment, you will end up paying $2,500 in interest. Now, let’s imagine that you start off with the same $5,000, but your interest rate is 23%. If you pay the minimum, you’ll end up paying $8,833 in interest. That’s a heck of a lot more money that could’ve been saved if you were able to get a better interest rate.
Those bills may seem like a headache you want to avoid now, but in the long run you’re only prolonging your misery. When you’re in an unpleasant situation, sometimes it’s easier to avoid the problem than it is to face the music. Of course, this doesn’t accomplish anything except making the problem worse. The debt is not going to just go away if you don’t open the bill. The best thing to do is face your fears, get organized, and stay on top of your bills like your life depended on it!