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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

#111

Post by jldugger »

ricardou wrote: post #6

I don't know what it is, but autopay causes me so much mental load. Instead I go over my bills every two weeks, following the tune of my paycheck. Every two weeks I check all credit cards, pay my mortgage, utilities, etc.

Counterpoint: autopay gives me peace of mind knowing that I won't miss a payment, which has huge downsides: credit score dings, interest charges, and potentially declined charges.

What I think trips people up is accounting for future expenses. The personal finance tools I've checked out focus on historical transactions but fail to put this to use and forecast future transactions. I set up GNUCash[1] to automatically create all the random monthly bills up to 3 months ahead of time, including a guess at CC totals.

I still check monthly, but its mostly just confirming nobody's stolen my card and updating my investments, which I can't forecast ahead of time =)

[1]: https://www.gnucash.org

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

#112

Post by graton »

I don't use auto-pay from the credit card company, but I do setup my credit union to pay ~$50 to each one of my cards each month, which should meet the minimum required payment, in case I might forget. Then I manually pay off the balance of each credit card each month, sometimes more than once in a month.

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

#114

Post by jbombadil »

I wish there was a bank that would offer a "programatic" checking account. I would open such a checking account and use it as a buffer:

* Have my CC be autopay-in-full from the buffer account.

* Have some CC hookup mechanism (similar to what mint or plaid use) so that whenever a CC charge lands, it moves exactly that amount of money from my real checking account to the buffer account.

* If at any point I make an expense where the amount is larger than what I have in my real checking account, send me all possible means of notifications. Immediately call me, text me, email me, and throw a batsignal with a dollar sign to the clouds for the sake of it. The purchase will still go through, but I have 30 ish days to fix the situation before I'm charged any late fees.

With this, I have the benefit of the CC rewards, but it acts as a debit card.

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

#117

Post by jldugger »

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…

> Isn't it very uneconomical?

On the contrary, the terms of credit cards include a "grace period": if you buy something on a card in the first day of a statement period, you will get a bill due to pay it off 45-50 days later (statement period closes after ~30 days, and then you bill is due a few weeks later). If you pay in full, carrying no balance over, there are _zero_ interest charges. Especially in today's rate environment, floating a few thousand dollars month to month for free is worth actual money, like a hundred bucks, if you invest in a 5% APY saving acct.

On top of that, many cards include a "cash back" feature, where every dollar you spend through the card gets you miles or a few pennies back. Figure about 2% cash back is a competitive rate, 2.5% at the top end, so it's about half as valuable as the float. This is basically fueled by networks charging merchants fees to accept credit card payments.

In theory merchants raise their rates to compensate for the merchant fees. In practice people paying cash pay the same as those who don't, so you might as well jump ship on this collective action problem.

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

#118

Post by ghaff »

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.

I think you're probably right. I pay/autopay the statement balance by the due date but I don't send the CC company money that isn't actually due yet even though it's already on the card.

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

#119

Post by landemva »

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 have a lot of available credit without ever using it.

I find it funny that the example person with big credit lines, which are unused, should care about a slightly better credit score. The financialization of everything coaxes people to care about numbers that don't greatly matter to their situation - they already have the credit line.

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

#120

Post by redblacktree »

kccqzy wrote: post #107
inetknght wrote: post #102

Earlier quoted context omitted.

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 aff…

I wasn't aware that this was a bad thing. I have a couple of "business" credit cards that I use to segregate purchases for some sole proprietorships that I run. (as well as for the rewards, of course) There are occasionally months where I need to spend beyond the credit limit, and I pay the card early in order to do so. I had no inkling that this could be considered a problem.
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