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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

#131

Post by orev »

jimt1234 wrote: post #91
rqtwteye wrote: post #41

Earlier quoted context omitted.

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’m surprised that you’re surprised about this. Credit card bills are the original dark pattern. Every other bill you receive has a single number in a box that says “pay this amount”, and when you pay that amount, you’re done. But with credit card bills, the number in the “pay this” box doesn’t mean you’re done, it means that you’re going to keep paying forever. It took a literal act of Congress (CARD Act - 2009) to force them to add the disclosure to the bill that making the minimum payment would increase the time and interest you’d be paying.

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

#132

Post by WendyTheWillow »

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.

Exactly; it's effectively the same thing but with a rolling one-month interest-free float.

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

#133

Post by WendyTheWillow »

lazide wrote: post #58
WendyTheWillow wrote: post #33

Earlier quoted context omitted.

…except autopay isn’t invisible? Also what in the world does paying off a credit card monthly have to do with “nickelandimeism”? How you use the CC is a wholly separate from how you manage its payment.

It’s invisible in the sense that it requires no action on one’s part for funds to be transferred. Which enables (in many ways) nickel and dimeism, as it disconnects the original spending (nickels and dimes, often) from the actual withdrawal of funds from accounts. You’d just see the overall bill slowly creep up with no clear cause. Frog boiling.

I disagree. Because you're not spending literal cash (it's already disconnecting the spending from the withdrawal of funds), a credit card sits somewhere along that spectrum. Once it's digital bits, the dissociative effect has occurred, credit or debt.

The only "pure" argument here would be to pay with cash, but the logistical cost heavily outweighs the psychological value if you go down that path, in my opinion.

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

#134

Post by ghaff »

lazide wrote: post #65
ghaff wrote: post #36

Earlier quoted context omitted.

30 minutes a week seems like a lot. (Admittedly the alternative of scanning your credit card bills and bank transactions is not zero but it's a lot less.)

And this is how they get you - not even paying attention 30 minutes a week gives tons of room for folks to start skimming/shrinkflating/double charging you.

Do what works for you.

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

#135

Post by inetknght »

landemva wrote: post #119
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 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.

> 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

Having credit lines in credit cards is one thing. But having that credit line doesn't mean that doesn't mean they "already have the credit line". A good credit score will save you tens- or hundreds- of thousands of dollars with reduced mortgage rates. So it's important to have good credit hygiene with cards to build that score.

Yes, the financialization of everything perverts incentives. Unfortunately that's the world we live in. I certainly don't believe that someone's home should be an investment vehicle. Nonetheless, it most certainly is one right now.

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

#136

Post by inetknght »

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…

> You are incredibly confused about terminology here.

Perhaps, but I doubt it.

> 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.

I don't use Autopay. I pay my card off (usually in full every month) when I review the online statement. If I review my statement early and I know that I have upcoming charges then I'll pre-pay to avoid interest charges. Some months end up with effectively a zero balance for the month.

> What you are describing (having zero balance reported) is called cycling the credit limit.

No, I am absolutely not. Cycling your credit is where you charge close to your credit limit, then pay it off, and repeat that several times in a single cycle. Cycling your credit once might mean that you had some big expenses. Doing it repeatedly (eg several months in a row) means that something about you is suspicious and warrants an account review. Maybe you lied about your income, or need a credit limit increase, or you're gaming some rewards system, or you're using a personal account for business, or something that's even more unusual.

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

#137

Post by lazide »

WendyTheWillow wrote: post #133
lazide wrote: post #58

Earlier quoted context omitted.

It’s invisible in the sense that it requires no action on one’s part for funds to be transferred. Which enables (in many ways) nickel and dimeism, as it disconnects the original spending (nickels and dimes, often) from the actual withdrawal of funds from accounts. You’d just see the overall bill slowly creep up with no clear cause. Frog boiling.

I disagree. Because you're not spending literal cash (it's already disconnecting the spending from the withdrawal of funds), a credit card sits somewhere along that spectrum. Once it's digital bits, the dissociative effect has occurred, credit or debt. The only "pure" argument here would be to pay with cash, but the logistical cost heavily outweighs the psychological value if you go down that path, in my opinion.

Or it’s a grey area. And at least some direct interaction on relatively short timescales (the same week) without it being easy to ignore (like a repetitive individual alert) is better than none?

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

#138

Post by sagarkamat »

Sohcahtoa82 wrote: post #71
lolinder wrote: post #64

Earlier quoted context omitted.

But if you're going to check it every month anyway, why have the backstop be the minimum payment and not the full payment? You don't lose the right to dispute a charge just because autopay paid the statement off, and setting it to pay in full means you won't be charged any interest at all if you forget to check one month.

If I autopay the full amount before realizing there's a fraudulent $1,000 charge on my card, then I'm in for a surprise when an extra $1,000 is missing from my checkout account. A pending fraudulent charge on my credit card isn't a problem. Cash missing from my bank account until the investigation is complete CAN be a problem.

But there are usually 25 days between when a statement is generated and an Autopay is deducted for that statement. Just have your checkup of the statement scheduled between those 25 days

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

#139

Post by kccqzy »

inetknght wrote: post #136
kccqzy wrote: post #107

Earlier quoted context omitted.

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…

> You are incredibly confused about terminology here. Perhaps, but I doubt it. > 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. I don't use Autopay. I pay my card off (usually in full every month) when I review the online statement. If I review my…

You are still confused.

Your statement doesn't get generated until the billing period closes. For all intents and purposes, the one number that gets reported to the credit bureau is the balance shown on that statement, which is a fixed value for the whole month. Even if you pay off the entire balance as soon as the statement gets generated, you can see a zero number for most days during that month, but credit bureaus still see the positive number on your statement.

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

#140

Post by LeafItAlone »

LorenPechtel wrote: post #22
mcast wrote: post #5

The first thing I do for any credit card is enroll in autopay. You can always make additional payments and pay off in full, but late fees and late payments are arguably more disastrous for your long-term credit than accruing interest for a cycle.

And if you set autopay for the full amount you'll never have interest. I also have e-mail notifications for any transaction above $1 since I have yet to see a credit card with notifications for all transactions.

> since I have yet to see a credit card with notifications for all transactions

Weird, all of my cards allow for notifications for all purchases.

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