General Question

Russifer's avatar

Does anyone pay their bills twice a month (half each time) instead of once a month?

Asked by Russifer (83points) January 6th, 2009

I know that paying your bills twice a month, half the amount each payment, will save you a ton of interest. Is there anything special you have to do, like inform the payee you’re doing this? I’m also worried that if I start doing it, somehow I’ll be charged a late fee since each of my payments is half the required amount. Anything I need to know before starting this? Thanks!

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13 Answers

EmpressPixie's avatar

I see from your topics that this is about credit card bills.

If you pay your bill in full every month, you are not (or shouldn’t be) charged any interest. It is not until you carry a balance that you start to pay the credit card company interest on your purchases.

If you are carrying a balance, you still need to make the minimum payment on time or you will be charged a late fee. Further, you need to pay off as much as you can or you are charged a finance fee (ie, interest) on whatever you did not pay off fully the first time.

However, if you have a long standing balance that you are trying to pay down, I believe paying the bill twice a month is meant to be paying above the minimum payment, above the new balance added for the second payment. This is a means of paying your card down faster. I suspect it is especially helpful for those who get paid every other week or weekly.

Russifer's avatar

Actually, maybe I shouldn’t have included Credit Cards in the Topics, because personally I don’t carry any balance on my credit card. I guess I meant it for loans that automatically have interest, like school loans, auto loans, mortgage payments.

If a loan payment is $200 a month, and it’s due on the 1st of the month, there are tips that say to pay $100 on the 15th, and $100 on the 30th. I guess this is so for half the month, you’re not charged interest on the $100. But I just wanted to make sure that when you pay the second $100, the payee won’t think that’s the full $200 payment and charge you a late fee for not paying the full $200.

EmpressPixie's avatar

As long as you are paying early, not late, you’ll be fine. So for a payment due on the 1st of August, paying half on July 15th and half on July 31st is fine. I would call my lending institution and tell them the plan, that way they can tell you any weird quirks they might have (like they only process one loan payment a month or something) that might get you into trouble with this system. Otherwise, sounds like a plan!

MrItty's avatar

You need to talk to your lender before you do this. Some lenders, ususally depending on the laws of the state you live in, will charge “pre-payment” penalties for paying your loan off early. If there are no pre-payment penalties, then go for it. Pay as much as you can as soon as you can. It doesn’t have to be split 50/50 twice a month. If you find yourself with an extra $20 the first week of the month, make a $20 payment to the loan. Anything that reduces your principal will save you money in the life of the loan because you’ll have less interest charged.

tekn0lust's avatar

Actually the bi-monthly payment method doesn’t buy you that much, especially since you are usually charged a “reconfiguration fee” up front to change the loan repayment schedule. It is far better to make an additional principal payment equal to one months mortgage payment per year or to add additional principle to your monthly payment.

Google “bi-monthly mortgage scam”
http://www.thehappyrock.com/2008/04/05/the-myth-of-the-bi-monthly-mortgage/

But as stated each lender is different and you will need to verify with them the impact of a change on repayment schedule. Back when I got out of college I had a balance on a discover card and I setup a weekly draft out of my bank account rather than a lump sum each month. They never had any problem with it, in fact it shielded me from missing any monthly payment.

MrItty's avatar

Yup, I just bought a new car last month, and they tried to hit me with this scam too. Wanted to charge me extra money for the privaledge of having another company send me two bills per month, rather than them sending me one bill per month. I looked at the guy and said “but there’s no pre-payment penalty, right? So why can’t I just send you extra money each month?” He stammered, and said “uh, yeah you can, you just have to keep track of it yourself…”, as if that was something difficult to do.

Under no circumstances should you pay more money for the privaledge of paying money more frequently. Just do it yourself.

AlfredaPrufrock's avatar

As long as you’re paying ahead and not late, there’s no problem. I pay extra on the mortgage each month by rounding up, and they never say anything.

augustlan's avatar

Paying twice a month really doesn’t save you all that much in interest. Paying every two weeks is the equivalent of making an extra payment a year. Here’s why: There are 12 months in a year, so paying twice a month means you’ll make 24 half-payments per year There are 52 weeks in a year, so paying every two weeks means you’ll make 26 half-payments per year. Two extra half-payments = one extra whole payment.

AlfredaPrufrock's avatar

The extra money I pay on the mortgage equates to two month’s worth of principal each year, and should end up saving me about $10,000 on a 15 year mortgage.

augustlan's avatar

@Alfreda: It doesn’t really matter how or when (as long as it’s on time) you pay the extra money, and I’d rather do it your way (extra once a month). However, you should be sure to note that the extra money is for principal only, otherwise they can/may apply it to principal and interest using the same ratio as your regular payments!

AlfredaPrufrock's avatar

Yes, the first time I sent the extra payment, I got a letter back from Chase asking me if I wanted the money to go to escrow or principal. I started do it because I was rounding up all my bills to the nearest $10 to make my check book easier to balance. For some of the bills, like cable, I end up not having to pay at all in December, because of a credit balance.

EmpressPixie's avatar

@AP: That’s a GREAT idea. It would make the holiday season much easier on the pocket book too.

Paydaydirect's avatar

This could prove to be a benefit for you provided you pay on time.

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