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Published: Wednesday, May 22, 2019 @ 2:21 PM
Millions of Americans pay their bills by writing checks or setting up automatic withdrawals from their bank accounts on a monthly basis.
Many of those same people may also be spending more than they need to by missing the opportunity to get a discount for paying in advance.
We know what you’re probably thinking: “Payment in advance? Why would I do that?” Yes, paying in advance can be risky in some cases, but there are actually some very sound reasons why you should consider it.
The #1 reason is because there’s often a money-saving incentive — but it’s not a strategy that works for all your bills.
Money expert Clark Howard says, “Usually any kind of insurance premium is worth paying in advance — if you can afford to do it.”
Among other kinds of insurance you might consider paying in advance, this would definitely include the big 3:
“For life insurance, you can get a big cut,” Clark says. “For example, an entrepreneur might pay one lump sum for a policy and they’ll get a big discount by paying it all up front.”
Some other businesses, like pest control services, orthodontics programs and the like will give you discounts for paying up front, as well. But as we mentioned at the outset, not all advance payments are equal. Make sure you are dealing with a reputable company if you’re paying up front.
There are some times that you absolutely do not want to pay in advance, even if there is a discount involved. Here are a few:
If a company goes bust and you’ve paid in advance, you may be out of luck.
Clark says considering how long a company has been around is no sure way not to lose your shirt. After all, how many of us still have Sears or Toys R Us gift cards lying around?
“The danger with anything is that if you pay in advance and they fly the coop, you’re out of luck,” he says.
The chance that a business may flop is all the more reason you should always use a credit card for advance payments.
The consumer protections afforded to credit card users — especially if a product is not delivered or a service performed — are much greater than they are with debit cards or checking account drafts.
The takeaway here is to pay for things in advance when it makes sense to do so. And remember these parting words from Clark:
“There’s always a danger when you prepay, no matter how much you save.”