Personal finance 101: How to pay your utility bills

How do you pay your bills? My father taught me to pay them on time and in full. That’s great advice, but there is so much more to correctly paying your bills. As a small town municipal employee, I have assisted people with their water bills for many years. Most of the problems that people have could have been prevented or solved simply by following the following steps.

Read Your Bills

When you receive your bill, read it from top to bottom. The bills that I send out have a lot of information on them. They have last month’s amount due and the amount the town received for that bill. Those two numbers should match each other and the amount you paid.

Check to make sure you were credited correctly. Call immediately if your records indicate that you were given too much or too less credit. Many people will call for being under-credited, but don’t when we credit them too much. Eventually, the mistake will be caught and you account will be adjusted. So the next month’s bill may be higher and blow your budget.

Next, the bill gives the previous and current meter readings and the charges for that month. Make sure this months charges are for your normal usage. If they are higher or lower than normal, call immediately to ask for a reread. If you wait until the due date of the bill, an accurate reread can not be done.

Again, people are quick to call and complain when their usage has doubled, but no one calls when they have only been billed 100 gallons. Remember that next month the usage will catch up and the bill will be extremely high.

The bills I use have a total amount charged and a total amount due. These two numbers should be the same. The total amount charged is the amount you are charged for this month’s services. The total amount due is the amount charged plus any previous balance or credit. Many people get confused when they are not the same. Usually the difference is from over or under payment of the account in a previous month. Remember that you pay the amount due and not the amount charged.

One customer paid the same amount every month for a year. They were looking at the previous payment amount. As the bill fluctuated they started adding up a high unpaid balance. This accrued late fees and they were eventually placed on the disconnect list. Even though they paid every month, the balance they owed had slowly crept up to over $40. Of course, they were furious and blamed us. By the time they left our office, they were extremely embarrassed but still blamed the hard to understand bill.

Pay Your Bill on Time

Now, back to what Dad taught us: Pay your bill on time! Yesterday a customer came in complaining about how high his water bill was and that he used below the minimum amount of water billed. Sure enough, he used less than the 2,000 gallons that generate a minimum bill. He has two meters and has not paid a bill on time in over two years. That is $480 in late fees a year! No wonder his bill was so high. The late fee was over fifty percent of his bill.

There are many ways to get funds to companies that bill us each month. If you pay with cash, remember to hand to money to someone and to get a receipt. Making a copy of your cash before placing it in an envelope and putting it in the night drop or the mail is not a smart option. Other options include:

  • Checks are great and provide an opportunity for you to put your account number on the memo line. Just remember that if you mail the payment in, you are assuming the risk that the check can get lost in the mail.
  • Bill-pay services are great if you read the fine print. Many companies need up to a week to process your check and then mail it to the company. If your due date is less than a week away, this is not a good option.
  • Debit cards are also a good way to pay. A receipt is automatically printed. However, many places (like my town) charge an additional fee. A few dollars a month for a year can add up! One customer computed the additional fees that she was paying on all her bills and was able to save over a hundred dollars a year just on the $2 to $5 dollar additional charges.

If you are sending your payment by check or bill pay, make sure that the correct account number is on there. One customer had their water disconnected for non-payment, but was able to produce cancelled checks showing proof of payment. The customer had a common last name and had put the wrong account number on their check. Each month their payment was applied to someone else’s account.

Always include the portion of the bill that should be returned. This will also help ensure that your payment is applied correctly. And never staple your check to the bill stub. Checks are made from a thin paper that rips when you try to remove the staple.

Call your utility provider as soon as you realize that you are going to have a problem paying in full by the due date. Our town has a policy to help people if they call or come in before the due date. After the due date, the balance must be paid in full or the utility is subject to disconnect.

If you do need help, always offer what you can pay. This shows that you are trying to pay the bill. Then, do your best to make next month’s bill lower. If you are asking for an extension every month, but your usage is not going down the town will stop granting you extensions.

Solving Problems

If your usage is up, look for a leak. Most people assume that water leaks are drips that make noise or puddle in your yard. Here in Texas during July, a water leak in your yard may not make a muddy spot until the fall. Toilets are notorious for leaking and most of the time they are the quiet culprits. A leak 1/16” of an inch in diameter can waste 74,000 gallons in three months. So don’t think that the small drip from the kitchen sink couldn’t be the reason you usage went up by a thousand gallons.

Lastly, be polite if you have any trouble with your bill. The people that you are depending on for help don’t like to be yelled at or cursed at anymore than you do. I will personally drive to your house and reread your meter, spend days going over history, and anything else that needs to be done — if you are nice to me. When you come in or call and you start yelling accusations at me, I’m not going out of my way to help you.

Most of these things are obvious. We either just forget them or just never thought about it. So remember, pay your bills on time for the correct amount — and include your account number.

This article was written by Wanda, who wrote to tell me that a shocking number of people have trouble paying their utility bills correctly.

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There are 17 comments to "Personal finance 101: How to pay your utility bills".

  1. Hank says 26 December 2008 at 07:08

    One great thing you can do with your utility bills is to have them smoothed out. After about six months of steady utility use, you can get your bill set to a certain amount every month leaving the guess work out of your budget.

  2. FranticWoman says 26 December 2008 at 07:33

    I didn’t know this could be so complicated – this post was an eye opener.

    I will tell ya…I am one of the rare ones that called on my utility bill for too LOW of a bill – it was only $9 for elec and gas. I assumed it was an error. The rep was v. nice and explained they had billed the previous month for “projected” amt of usage…which, upon review, revealed that it was for DOUBLE the units I use on average. So…it was like I paid ahead. I am a bit annoyed though I was “double billed”, which I paid, without my consent, although it worked out in the end.

  3. Franklin Bishop says 26 December 2008 at 08:31

    The best thing to do it’s his pay your bills on time. So many people get in trouble because they’re always late on their bills.

  4. Fabulously Broke says 26 December 2008 at 08:50

    This is a really great post because paying utility bills seems to be a hassle everywhere.

    Am linking to this.

  5. Adam says 26 December 2008 at 08:57

    Online bill services run by the utility companies themselves are very convenient, especially if they don’t charge a fee.

    Because the company itself is running it, they will credit your account on the date you make the payment, even if it takes a few additional days to clear with your bank.

    My current electricity company does this. There is a fee if you use a credit card, but no fee if you use a bank draft.

  6. Greg C. says 26 December 2008 at 10:12

    $480 in late fees on a WATER bill? None of my utilities charge more than a $5 late fee. Most are something minuscule like 2% of the balance.

    I’ll be completely honest. I pay some utilities 2 months late and/or run about a month behind a lot. I do NOT recommend this but in most cases utilities are one of the last things you need to pay on time. Why? Well, it’s usually not on your credit report. You can’t have them repossessed and auctioned off for being a day late. The late penalties are usually low. You can usually go around 3 months before a disconnection threat. There are assistance programs and charities that help with heating costs and disconnections. And so on.

    My biggest issue is my gas and electric companies charge fees for credit card payments. I guess this is OK as the fee is technically paid directly to the payment processor. It just sucks if I want to pay a bill that might only be $20-40 and pay a $5.95 fee. I think they should just get a processor and eat the fees, but I don’t know all the regulations and other issues.

  7. Greg C. says 26 December 2008 at 10:17

    More utility peeves: When I was a kid my mother always called in our meter reading and they waived the fee. As an adult I have usually had the option to read my own meter but my utilities have never offered a discount. My gas meter is only read once every 3 months. The other 2 are estimated. One time I was charged something around $200 for a $60 month. The next month the bill was just very low. I could signup for the monthly payment plan where you pay 1/12th of your yearly charge every month, but I prefer more flexibility.

  8. Shirley says 26 December 2008 at 10:19

    If you follow the budget plan as mentioned in #1 per Hank (which I agree can be a great idea), be sure to note how much the charges actually are each month so you’ll have an idea of whether your budget billing will go up significantly in the future. We use the budget billing for my son’s apt at college because the costs fluctuate widely by season, but I charge his roommate half of the actual bill because that is the true charge. The budget billing amount is extended to us based on our past history. That was before this roommate and potentially could be after he moves on, so keep that in mind if sharing costs.

  9. Bill M says 26 December 2008 at 10:19

    Best thing to do is do the yearly plan where they estimate how you will use, divede it up in 12 months and put auto ach in your checking account. This avoids so much hassle.

  10. lorrwill says 26 December 2008 at 16:04

    2 words: Automatic Payment.

    For my local utility company, there are no fees for this service. They debit my checking account and get their money in full and on time every month. They love me for that.

    I can move anywhere and get a glowing reference from them concerning my credit worthiness. Here in California, that does matter if you don’t want to pay a huge deposit to get your services turned on.

    However, the onus is still on me to review my bill for errors and deal with them immediately. I think I have had one error in the past decade or two and I made it in my favor.

  11. elisabeth says 26 December 2008 at 18:25

    both our water/sewer bill and our gas/electric bill show how much was used the year before and the gas/electric also has a breakdown of the temperature last year vs this year. I am striving to use at least no more, and ideally less each month this year than last. the year to year comparison is better than just this month to last month, because the seasons really do make a difference in utility use.

  12. CB says 26 December 2008 at 18:37

    I don’t use my AT&T (formerly Pac Bell) landline for long-distance calls (and have a separate land-line if I ever needed to use it instead of my cell phone). I called to have the fee cancelled and appeared to get someone in India who wasn’t too familiar with how we use phones. Unfortunately, most of my experience with Indian “support” has been that it is a waste of my time, and the people are nice, but not very well informed. I’ll never buy another Dell because of the difference between the support they had in Texas and the lack of support via India. After a truly awful experience with a new computer that arrived DOA, I later tried to have all of the catalogs I receive from Dell stopped. This time, I may have been sent to Pakistan. The concept of a street address was new. Also, after half an hour I was warned that the request may not go through. Of course, it didn’t!

    Back to AT&T, the “support’ person said that the fee would be removed, but it hasn’t for three months, and upon checking I see that I’m charged about $3.00 per month for Sunday calling, something I never ordered, nor used. This has been going on for 9 months. I’ve written to AT&T and have yet to get a reply.

  13. Mangela says 26 December 2008 at 18:55

    “assuming the risk that the check can get lost in the mail?”

    Well then. Guess I won’t send any more Christmas cards, birthday cards, or other bills through the mail. While I’m at it, I’ll stop ordering merchandise online (Amazon, etc) because, hey, I’m assuming the risk it can get lost in the mail.

    While I’m at it, I’ll cancel my magazine subscriptions. What if I miss an issue when it gets lost in the mail?

    Sheesh.

  14. Funny about Money says 26 December 2008 at 19:33

    Seems to me that if such a large number of customers have trouble understanding the statements, maybe the statements really ARE too complicated. Possibly the company needs to consider simplifying its bills? Our water, gas, and electric bills are easy to grasp, with no confusion about what’s due. The only utility bills I’ve seen that are hard to follow are Qwest’s, and those are transparently designed to be incomprehensible — not even the company’s employees can interpret them. Cox’s, however, are eminently clear.

    Where would a person get the idea that they could unilaterally pay a flat rate each month, instead of the amount billed? Has anyone ever asked these customers why they decided to start doing that? Possibly they’re misunderstanding the company’s ads for equalized billing?? Here, too, if that’s the case the company may need to address a communication problem.

  15. Mark says 27 December 2008 at 11:53

    Good point about receiving too much credit on your utility bill. The utility company may mistakenly discount your bill but they almost always catch their mistake later.

  16. BankerBryan says 29 December 2008 at 17:16

    I never realized that utilities had so many issues… after reading this article and everyone’s comments I’m going to go back through my previous bills.

    Not to mention I’ll be taking a closer look at future billings as well!

  17. Michael Belmonte says 03 April 2009 at 09:13

    I think that literally the best thing you can do for paying your bills is: SET UP BILL PAY WITH YOUR BANK!

    *DO NOT* set up “Auto-Pay” crap with ANY of the companies you pay each month. This allows them to automatically withdraw the amount you “owe” every month without any scrutiny on your part. This puts the ball in their hands, and you want it in yours.

    With your bank’s Bill Pay, you can literally pay every single one of your bills in seconds. I have every single bill set up online, so I can check all my balances every month when I’m ready to pay my bills. Then I enter Bill Pay, put in the amounts I want to pay on each bill (after proper scrutiny), press “Pay Bills” and voila! I’m done.

    I literally spend no more than 5 minutes (PER MONTH!) paying my bills, EVER! I also never make late payments because of how easy this is, I always have a FULL history of my payments logged by my bank, and most importantly, every month I can completely go over my bill and make sure I know what I am paying for, rather than them just taking what they say I owe.

    Great article!

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