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Autopay is making us worse at managing credit-card bills

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Re: Autopay is making us worse at managing credit-card bills

#91

Post by jimt1234 »

rqtwteye wrote: post #41
crazygringo wrote: post #11

The headline is not supported by the article. The actual truth of the article comes in the middle: > Borrowers who use autopay pay off between 8% and 17% less of their monthly credit-card balances compared with customers who make manual payments, according to the study... When credit-card customers sign up for autopay, they typically have three options for monthly payments: the required minimum, the statement balance…

I think the problem is the term "minimum payment". A lot of people don't seem to understand that this is a basically arbitrary number. They will make them same mistake without autopay.

I once worked with a company developing a payday loan app. We interviewed hundreds of people with money problems. It was amazing how many people thought the minimum payment was the payment. I tried to explain to a handful of folks that it was possible to pay more than the minimum payment and that would help lower the balance. Lots of blank stares, then "But it says the payment is $50; why would I pay them more than I owe?"

All the people I talked to seemed like good people, but the lack of basic financial knowledge was shocking to me. Not as shocking as the payday loan industry, though. But that's a different topic. (If you're in the payday loan industry, quit now. Start dealing meth, you'll be doing the world a favor.)

Re: Autopay is making us worse at managing credit-card bills

#92

Post by boc »

andrelaszlo wrote: post #62

I set up my (Swedish) CC bill to autopay the full amount each month. I only use it for emergencies though. It seems like it's really common elsewhere (the US) to use it for larger purchases. Isn't it very uneconomical? I recognize that I might be speaking from a position of relative financial privilege, but it doesn't seem limited to people in acute financial distress? Maybe it works differently too. I've read stuff…

US-based here. Here's my strategy:

Hook up credit cards to bank and setup auto-pay on full balance and treat them like debit cards.

Pay for everything with the credit card that gives me the most points in that category (aka 4X on dining, 3X gas, 4X groceries, 3X travel, etc).

Fly for free multiple times a year by using my credit card points to book flights/transfer to airline partners. Also get a bunch of nice travel perks. My last airport meal + drink was free because of some random credit card bonus.

Credit cards in the US are amazing. You also get what it essentially a 0% loan for ~40 days from after buying something and when the money comes out of your bank account, plus great fraud/return protection from Visa/Amex.

Re: Autopay is making us worse at managing credit-card bills

#94

Post by dkjaudyeqooe »

Analemma_ wrote: post #7

One thing that has really helped me is that you can set up the Apple Card so that it sends a notification to your phone for _every single purchase_, whether one-off or recurring. Of course you can turn this off if it annoys you, but I have found it's good to leave it on: it makes CC purchases "hurt" like spending cash does, and occasionally reminds me of recurring costs I would otherwise have forgotten. Probably othe…

This is the simplest and most effective form of security for your credit card as well. You can have the notifications sent to email which is less annoying and more effective. Taking a moment to review your transaction emails means you'll quickly discover if someone has stolen your card details, or if someone has overcharged you for a purchase.

Re: Autopay is making us worse at managing credit-card bills

#95

Post by fdye »

crazygringo wrote: post #11

The headline is not supported by the article. The actual truth of the article comes in the middle: > Borrowers who use autopay pay off between 8% and 17% less of their monthly credit-card balances compared with customers who make manual payments, according to the study... When credit-card customers sign up for autopay, they typically have three options for monthly payments: the required minimum, the statement balance…

Agree this is a UX problem. They need an option, "Pay minimum + X amount each month" so a user could set it to be $25 for their min + $50 to pay down a bit of the balance. This is actually the prescribed way most places recommend to repair or keep a high credit score. If you pay it entirely off you get dinged, if you just pay minimums you get dinged.

Re: Autopay is making us worse at managing credit-card bills

#96

Post by ghaff »

neogodless wrote: post #82
WendyTheWillow wrote: post #35

Earlier quoted context omitted.

It’s also arguably innumerate, or at least financially unaware. The middle option is the optimal choice, as it gives you a free one-month loan from the bank. Interest doesn’t accrue until you’ve carried a balance over month to month.

What is the "middle option" between paying the minimum and paying the full balance that is more optimal? If you pay the full balance on the due date, you get the interest-free loan. It's not exactly one month, but it's from purchase date until due date, which is something like 25-55 days.

I'm not sure I understand the comments on here about autopaying the full balance leaving interest on the table. AFAIK, all my autopay options pay pretty close to the due date. I'm pretty sure if I tried to time it closer on my own I'd have some late payments which would be far more than the fraction of a percent interest I might incrementally earn. Even with higher interest rates, micro-optimization doesn't make sense for most people.

Re: Autopay is making us worse at managing credit-card bills

#97

Post by redblacktree »

fdye wrote: post #95
crazygringo wrote: post #11

The headline is not supported by the article. The actual truth of the article comes in the middle: > Borrowers who use autopay pay off between 8% and 17% less of their monthly credit-card balances compared with customers who make manual payments, according to the study... When credit-card customers sign up for autopay, they typically have three options for monthly payments: the required minimum, the statement balance…

Agree this is a UX problem. They need an option, "Pay minimum + X amount each month" so a user could set it to be $25 for their min + $50 to pay down a bit of the balance. This is actually the prescribed way most places recommend to repair or keep a high credit score. If you pay it entirely off you get dinged, if you just pay minimums you get dinged.

How do you get dinged for paying it off entirely? I pay all my credit cards in their entirety each month, and it has not seemed to ding my credit score.

Re: Autopay is making us worse at managing credit-card bills

#98

Post by icedchai »

neogodless wrote: post #90
icedchai wrote: post #16

Earlier quoted context omitted.

I haven't paid bills "manually" in almost 15+ years. You waste so much time opening mail, writing checks, buying stamps, etc. I put everything on auto-pay, with the exception of property taxes (only because the city won't allow it.)

Do you not have the option to receive emails and pay online? All of my "manual" bills work that way. It takes a few seconds of clicking to schedule the payment on the due date for the full amount, and even log it to my software, which doubles as a chance to check that there wasn't something unexpected going on. I think being fully aware of every bill or credit card you pay is helpful in being full control of your fin…

I do! I used to pay by check, then "manual" bill pay for a while, then finally I just did auto payment. I pay off my credit cards in full every month. I have zero debt. Believe me, my finances are more than under control. I could FIRE tomorrow if I wanted to.

Re: Autopay is making us worse at managing credit-card bills

#100

Post by WirelessGigabit »

Analemma_ wrote: post #7

One thing that has really helped me is that you can set up the Apple Card so that it sends a notification to your phone for _every single purchase_, whether one-off or recurring. Of course you can turn this off if it annoys you, but I have found it's good to leave it on: it makes CC purchases "hurt" like spending cash does, and occasionally reminds me of recurring costs I would otherwise have forgotten. Probably othe…

I went back to requesting paper statements.

When you get an email with your statement you have to click on the button (or navigate to the website), put in username and password, wait for the text to arrive (because half of the banks I use don't support YubiKeys), navigate to the PDF, wait for that to load.

And then it's on my computer, a tool that is supposed to be there to make me more productive, but instead, Microsoft has elected to show me popups that I might want new TikTok templates.

Now, when I go get the mail, I walk there. I'm outside. Give my eyes some rest. No texts. Say hi to the neighbor. Stare angrily at the other neighbor who is using their leafblower on a high-smog day.

Walk back inside, open the mail. Look at the physical statement in my hands. No popups. No Slack calls appearing.

It all looks good? Great, shred and trash.

If it doesn't... well, then I'll need to sign in, wait for the text, and file a dispute. If I don't get distracted.

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