Why you SHOULDN’T prepay your monthly bills

Why you SHOULDN’T prepay your monthly bills

Earlier today I wrote that I like to prepay my monthly bills. I acknowledged that some people might think this was dumb, but that I liked to do it anyhow. It's not often that I share something with which GRS readers vehemently disagree. This is one of those rare cases.

Because there's so much opposition to this idea, and because each of these points is valid, I've combed the comments to compile a list of reasons you should not prepay your monthly bills:

  • When you pay your bills monthly, you're more likely to review your statements to be sure there's nothing amiss. If you prepay your bills, you may not even bother to open the statements.
  • Some companies refuse to accept prepayment, and may even charge a processing fee to issue a refund check.
  • It's up to you to keep track of when the prepayment is up. As I mentioned in the comments on the previous post, I have a co-worker who often forgets when the prepayment period is over (because he doesn't check his statements), and he ends up with late fees.
  • By prepaying, a person may be tempted to spend the money on other things. For example, if you prepay your cable bill, you may be tempted to purchase a pay-per-view show that you otherwise would ignore.
  • What happens if you prepay a bill and suddenly discover you need the money for some other obligation? Or what happens if you are forced to move? Or your house burns down? You've already prepaid, so there's no way to get your money back.
  • By prepaying bills, you create an artificial cost-of-living. Because you're not dealing with monthly cable or phone bills, it's easy to forget that they need to be accounted for.
  • Setting up automatic billpay from your checking account would accomplish the same thing, but you'd get to keep the money in an interest-bearing account before it was needed.
  • And the most popular reason to avoid prepaying your bills: When you do so, you're essentially providing an interest-free loan to the company you've paid.

These are all excellent points. But are these arguments strong enough to make me change my mind? Only one. Before I next prepay my monthly bills, I'm going to do more research into automatic billpay. The last time I checked, my credit union wanted $5/month to do this.

While these arguments aren't strong enough to dissuade me from prepaying my bills, they're strong enough for me to regret having posted the money hack this morning.

More about...Planning, Money Mindset

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