It’s the time again.  I pay my my cheap car insurance in Clearwater in 6 month chunks.  I prefer doing it this way because then I don’t have to think about it again for another 6 months.  Sure, technically you can save a little money if you pay it monthly, but since savings accounts are barely paying anything right now, it’s not really going to make a difference.

Wait, let me expand on that.  I’ve been told that some companies charge you a little extra if you pay monthly.  Assuming that isn’t the case (meaning your 6 month bill is the same as 6 times your monthly bill), then it’s not really going to make a difference.  Sure, if you pay monthly then you can keep the extra money in your checking account and earn a little interest on it, but like I said, savings accounts aren’t even paying 1% right now, so you’re really not saving much money doing it that way.  Look at it like this:

Say your monthly premium is $50.  So you can pay 6 months at a time and that’s $300, or you can pay $50 a month and for the first month you will have an additional $250 in your savings account.  Now let’s say you’re lucky and your bank is paying a full 1% interest on your savings account, so you’ve got that $250 which is making 1/12 of 1% (cuz remember, your bank is paying you 1% per year, not per month).  One twelfth of 1% of $250 is just under $0.20.  So that first month you’ll have saved 20 cents by not paying it monthly.  The second month, after you make your second payment, you now have $200 left over (the balance of what you would’ve spent had you paid all 6 months up front).  One twelfth of 1% of $200 is less than $0.17.  So after two months you’ll have saved less than $0.37 doing it this way.  Finishing up the months and you’ll have made $0.61 in interest over the 6 months.

And that’s if your bank even pays 1% interest.  Most banks aren’t even paying that right now.

Look, I know every dollar counts, but I’d rather just pay it 6 months at a time up front and not have to worry about writing a check (or paying online) every month.  Maybe if we were talking $10 difference or something then it would be worth paying it monthly, but as it stands now there’s really no benefit to doing so.  And if your company charges you more to pay monthly then you should definitely pay it in 6 month segments if you can afford to do so.