Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Autopay is making us worse at managing credit-card bills

wsj.com

Post reply on HN
Print view View original

101–110 of 145 posts

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

#101

Post by redblacktree »

ghaff wrote: post #96
neogodless wrote: post #82

Earlier quoted context omitted.

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 sens…

I think the confusion is between "full balance" and "statement balance." The statement balance will generally be lower than the full balance, since the due date is typically weeks after the statement closes.

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

#102

Post by inetknght »

redblacktree wrote: post #97
fdye wrote: post #95

Earlier quoted context omitted.

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.

As I understand it, your credit score isn't dinged per-se, but it doesn't increase as much as it would if you carried a balance.

Remember that credit scores try to score your credit worthiness: are you capable of paying off a balance. How can that be measured if you never have a balance? Instead it simply appears that you have a lot of available credit without ever using it.

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

#103

Post by chrisnight »

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.

The middle option they are discussing is between never buying anything you don’t currently have the money for (what the parent commenter claimed), and buying more than you will be able to afford by the time the payment is due.

You can pay your rent bill on August 1st, even if you don’t have the money for it until your paycheck on the 12th, and then once you get your paycheck, you can allocate the money appropriately so that you can pay off the bill at the end of the month worry-free.

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

#104

Post by redblacktree »

qingcharles wrote: post #67
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…

Debit cards took a lot longer to take off in the USA than in Europe. They're picking up now, though. And Europeans took a lot longer to move from cash to electronic payments, IMO. The US has been using credit for everything for as long as I can remember.

I never use a debit card because of their relative lack of fraud protection. Even where fraud protection policies are similar, the money is still missing from your cash account during a dispute. Things may have changed, but this was the case when my habit was formed, and now I just don't use them at all, except for cash from ATMs.

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

#105

Post by pertique »

oh_sigh wrote: post #84
michaelmior wrote: post #43

Earlier quoted context omitted.

Not the OP, but the most likely reason I can think of is manual payments give an opportunity to review all charges. But still having the minimum set to autopay ensures that if you forget or unable to, the consequences are less severe.

I used to review charges, and it was always a pain. I know where I shop and don't shop, so if I see a charge for a place I don't shop, it is clearly fraud. But, a lot of fraud happens where you shop(because that is where people may have access to your card). That is, I gas up at Shell, but did I really gas up 23 days ago? Now, I have a text message/app notification come through immediately whenever there is a charge…

This is what I do, and I'm surprised that more people don't. It's trivial to clear text or email notifications when you make the purchase as they usually appear very quickly. Plus it makes it very easy to identify fraud.

Get a notification that your card was used at a gas station when you're in bed at 11pm and last filled up 5 days ago? Probably not legitimate. Plus, if you trust your CC company, it saves you from having to review your charges at statement close.

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

#107

Post by kccqzy »

inetknght wrote: post #102
redblacktree wrote: post #97

Earlier quoted context omitted.

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.

As I understand it, your credit score isn't dinged per-se , but it doesn't increase as much as it would if you carried a balance. Remember that credit scores try to score your credit worthiness: are you capable of paying off a balance. How can that be measured if you never have a balance? Instead it simply appears that you have a lot of available credit without ever using it.

You are incredibly confused about terminology here.

You have a balance. And then you let Autopay pay it off in full by the due date, which is after the balance appears on your statement and after the balance is reported to credit bureaus. You still don't carry a balance.

What you are describing (having zero balance reported) is called cycling the credit limit. This is indeed a dangerous behavior that can not only affect your credit score but also lead to account closures. Don't do it.

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

#108

Post by Jcampuzano2 »

I'm always worried about getting screwed by autopay in some way since it has happened once or twice in the past due to things like card number changing or a failure on the businesses end. So now I have both autopay on and manually pay everything.

For my credit cards my strategy is that I have autopay setup for the full amount. But I also manually pay every paycheck just as a sanity check.

The day I get my paycheck which is every 2 weeks, the first thing I do in the morning is immediately pay the entire balance off all my credit cards. So even things that technically would have been in next months cycle are paid off. Obviously not everybody has enough money available to pay off like this even for things that would have not been charged interest until the next cycle, but its what I recommend.

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

#109

Post by neogodless »

redblacktree wrote: post #101
ghaff wrote: post #96

Earlier quoted context omitted.

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 sens…

I think the confusion is between "full balance" and "statement balance." The statement balance will generally be lower than the full balance, since the due date is typically weeks after the statement closes.

Ah this helps! Yes I pay my full statement balance on the due date (in most cases.)

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

#110

Post by charlie0 »

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…

In other words, water is wet and people who are financially illiterate/irreponsible will continue making bad financial choices, no matter what tools are available to help aid them.
Post reply on HN