Autopay is making us worse at managing credit-card bills | Hacker News Reader

Autopay is making us worse at managing credit-card bills

wsj.com

82 pointslxm133 comments

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 full or a custom amount. Most people who enroll in autopay choose either the minimum payment or full balance, said Wang.

In other words, if you're already in the financial position to set it to full balance, then you're doing great, and autopay isn't making you worse at anything.

While if you set it to minimum payment, your financial position is obviously not great, and you're paying more in interest. But there's no evidence autopay is the cause here. Your lack of money is the cause.

If you're somewhere in the middle where you can pay more than the minimum but not the full balance, obviously you're not using autopay, because the amount probably changes each month based on what's left over from your other expenses.

The idea that autopay is the cause of not paying your bills is absurd. Causality runs in the other direction -- people who are already among the worst-off and can only afford the minimum, turn on autopay. (As well as those who can afford the full balance, of course.)

I auto-pay with minimal and log in at the beginning of every month and pay the full balances.

Why though? Are you actually paying the full statement balance in time each month this way and this avoiding interest charges? If so, then by paying before the due date you're giving away money unnecessarily, especially with interest rates at 5% now.

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.

Yes this is exactly it.

I like to review stuff and typically don't keep a large cash balance. An expensive month could 5x or more my spend; maybe I just paid for an overseas vacation, my home owners and auto insurance is hitting, and whatever all in the same month. Want to make sure everything is in place before kicking off the payments.

I do as the GP, autopay the minimum to avoid fines (not just interest) but then go in and pay the remaining balance before the end of the month.

Autopaying the full amount would work 95% of the time, except when I put something like a big holiday on my card and autopay pays the entire balance and the payment either fails because I forgot to have sufficient funds in my debit/checking account, or leaves me with very little whilst I wait for the money that was going to come in to pay for it.

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

Most credit cards pull the auto-payment either on the due date or the day before, which means that you have ~1 month to check your statements and file disputes/disable autopay in the event of anything unusual.

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 > $0.00 (chase at least supports this). Reviewing immediately, and then knowing that all charges are real at the end of the month, has been a real pleasant change in that workflow.

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.

Same, it's a good fallback in case you forget to login and make that payment.

Why would you do that?

So they psychologically notice and feel the amount spent perhaps?

Safety net in case it is forgotten. With children and life getting in the way, it is easy to forget some bills.

This seems less efficient/more dangerous than simply asking for mailed statements and then auto-paying the full balance. They'll deliver you a physical statement in the mail for you to look through/digest, and you aren't risking missing a month and paying interest.

With higher interest rates, I stopped paying the full balance and instead try squeezing a little extra interest out of the money (I buy USFR, which is giving around 5.3% right now). I still pay the statement balance of course.

Does USFR have principal risk? The price of USFR appears to fluctuate.

Well said.

> If you're somewhere in the middle where you can pay more than the minimum but not the full balance, obviously you're not using autopay…

That's not obvious to me. Just because someone can pay more than the minimum balance, doesn't mean that they do. I think that's one case where autopay could cause someone to run up unnecessary interest. A person may know that they can't pay the full bill, so they set up autopay to make sure they at least pay the minimum.

However, someone poor at managing their finances might have gone in to pay more than the minimum if autopay wasn't available. But since it's set to autopay, they might not bother to make any additional payments. This isn't necessarily caused by autopay, but you could argue that if autopay didn't exist, some fraction of people who are currently paying the minimum balance, might have paid down balances more quickly.

I don't hav any particular evidence to support this, but it seems plausible enough to me not to be dismissed out of hand.

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.)

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.

Or, that autopay allows people to not look at the credit card bill (or directly pay it) psychologically allowing people to ignore it easier and spend more than they’re making?

Which isn’t really an autopay issue, so much as an ‘enabled by autopay’ issue.

Some people are just bad at managing finances. I had a loved one who racked up $10k in credit card debt because autopay was set to pay the minimum payment. The payments were low enough that they thought they had more money than they did, and adjusted their spending accordingly. Eventually the interest caught up with their monthly expenses, and they came to me confused and overwhelmed. I helped them consolidate the debt and changed the setting to "full statement balance" - it's now been over a year with no issue. (We talk finances monthly to confirm that everything's still going smoothly.)

Manually paying would have caught the issue before it snowballed. Setting up autopay for the full statement balance in the first place would have entirely prevented the issue, as the extra money went entirely to luxuries that they thought they could afford.

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.

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.

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.

It's about the bank knowing their customer and appropriate limits for the customer income. If you cycle $50k in a month on a $10k credit line, and your credit application had your income at $80k/year, the bank may look into it.

Ah, ok. The numbers are nowhere near that close. If anyone looked more closely, I think they'd see the spending as legitimate. I did some research after you mentioned the term, and "credit cycling" is different from my scenario, I think. There is an element of intentionality to it, ala /r/churning.

> 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.

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.

> 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.

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.

Isn't that a like like saying people are irresponsible when they fall for dark patterns?

This involves money and profit. Privacy policies involve money and profit.

In both cases, there are clear financial incentives to make things confusing to the benefit of the financial institution.

Because credit cards got so bad, they added "nutrition labels" by law. These are the required disclosures that take about APRs, penalties, grace periods, fees and minimum finance charges, etc

A broader look at credit card industry, for those who can pay off monthly balance, is those people use it to get more points than they would with the debit card attached to the checking account where the funds sit for the autopay.

Rewards and benefits on debit cards are low or nonexistent due to regulatory pressure in USA to have lower network processing fees than credit cards.

Europe has lower card network fees than USA, so there are fewer rewards cards available.

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 other cards let you do this as well, although I'm guessing they don't make it as frictionless as Apple's does (where IIRC it's the default), because it's not in the interest of other CC providers for you to be noisily reminded every time you spend money.

You can usually have it set to send you a notification if it goes over a certain amount so set it to the lowest like $1 for most cards

I started using Mint which summarizes all your transactions across all accounts which is nice. No more surprises on what is going on.

This is a standard feature for many banks with quality phone apps. It's also good for alerting you instantly if your card is compromised.

I second this suggestion. My first card with CapitalOne back in the day also had this on by default (though naturally required the app), and I've made sure to go out of my way to turn it on with subsequent cards as well.

> not in the interest of other CC providers for you to be noisily reminded every time you spend money

All the big CC apps I use do exactly this. For big purchases some will send a notification to approve it in app on the fly. And yes, the alerts are very useful.

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.

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.

And another bonus is, you're costing the credit-card-issuing mega bank just a littttle more money to send you that paper statement and supporting the postal service on top.

A negligible amount to be sure, but an amount all the same.

The dark patterns around auto-pay are part of the problem.

One that bit me a couple of times this year was my bank's offering the ability to set an auto-pay limit.

Which you would think means "auto-pay the lesser of the account balance or the specified limit," to help smooth out payments for a larger purchase.

But instead it means, "short-circuit auto-pay if the account balance rises above the limit." It's easy to miss the notification about this, which blends in with other emails from the bank. Voila, late charge!

That sounds like it has the makings of a class-action lawsuit that would win.

You can clearly demonstrate the exact customers harmed by it. You should see if you can find a law firm to take it on.

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.

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.

This is what I do as well, I opened a second checking account so half of my monthly bills is auto deposited from each paycheck and I set all my bills to be at the end of the month so I can make sure everything is smoothly going through. I even have a Google sheet where I keep track of balances weekly and what bills are coming up like the yearly Amazon or something

Especially when I was doing a lot of traveling, I pretty much switched everything I could to auto-pay. I always found the weekly or biweekly bill paying something of a drudgery. I still periodically look through stuff but it's pretty rare I find a problem I need to deal with (and that's usually something like a charge from some payment processor I just didn't recognize).

Which it does definitely remove a lot of the work. Which removes a lot of the incentive to pay fewer things (requiring such work), and removes a lot of the visibility towards exactly what is being paid (and trends, etc.).

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.)

> You waste so much time

It's time well spent — making sure I am paying for the things I really need/want.

I still look at the statements. Writing checks and mailing them out is pure drudgery.

Paying "manually" doesn't mean writing checks and mailing it out. You just log into your bank and click pay instead of have it paid automatically.

It's still "manual" work. Why bother? Set it and forget it.

When they aren’t playing games? Sure.

When everyone under the sun seems to be playing games? It’s a good way to get taken advantage of.

I have more than that I can't autopay but I can go on my bank's site and just have them write a check to recurring payees.

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 finances. I get that impression that some people using automatic payments don't slow down to review things carefully. That may not be the case for you, but that doesn't mean others don't make that mistake.

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.

Agree. Autopay is an invisible gremlin reaching in and taking money from me every month. Nickelandimeism is apparently the new economy.

…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.

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?

I use the same practice. When I tried autopay, years ago, I felt like I never really knew how much money I had; it was like simultaneously balancing a checkbook backwards and forwards in time. Now I do it manually, paying off all current bills every time I get a paycheck, and that is much easier to understand.

This is wild to see other perspectives. I'm a reasonably upstanding citizen and I have basically two categories of bills:

Bills that are auto-paid.

Bills that are late.

The auto-paid ones are completely on auto-pilot. If I have a particularly heavy spending month (maybe we took a trip somewhere), I might open my bank app to make sure there's enough cash in the account to cover the auto-payment. (Or I might not and either there will be, or auto-overdraft-protection will kick in and I'll end up paying a few bucks in interest.)

>>I'm a reasonably upstanding citizen and I have basically two categories of bills: >>Bills that are auto-paid. >>Bills that are late.

I just mentally went down the list and it hurts me to admit it but that's the exact same for me.

I'm the opposite. I know it's wrong, because I'm giving companies free loans or whatever, but when I pay recurring bills (that aren't on autopay) I just multiply by 10 so I only have to pay once a year or so.

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

"Most people who enroll in autopay choose either the minimum payment or full balance, said Wang."

This is the problem. You should always be able to comfortably make the full payment if you manage your budget proactively—I highly recommend YNAB for this. If you can't proactively manage your budget, you should be using a debit card.

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.

It can also be the equivalent of picking up pennies in front of a steam roller.

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.

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.)

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.

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

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.

Archive: https://archive.ph/20231008050640/https://www.wsj.com/person...

Cited research: https://kenaninstitute.unc.edu/wealthinequality/wp-content/u...

From the research paper, it seems that this conclusion is based on less creditworthy cardholders.

> The credit card products offered by the fintech company range from $500 to $10,000 in credit limit and 10% to 30% APR, and are generally targeted toward consumers with lower credit scores and/or shorter credit records compared with the general population of cardholders.

> this conclusion is based on less creditworthy cardholders.

Who are exactly the target of most of the abuse in the credit industry.

Most industries frankly.

I only use the bank autopay on a CC that is used for stable recurring payments, like utilities, which themselves have autopay set up against the CC. The recurring payments are within certain amounts so the total CC bill is predictable.

For all other CC's, I do manual pay since I do the monthly review on the CC charges at the same time.

I was confused because I pay my credit card with autopay, or at least I thought I did. Never paid a penny in credit card interest. Because for me autopay means paying off the entire bill in full. I guess here it means paying off the minimum every month. Yeah, I can understand why that's silly.

Not terribly surprising. The time in my life that I was most on top of my finances was when I was using the old YNAB which required manually entering all purchases and manually reconciling your account. The effort put in to keep on top of it made me hyper aware of what I was spending and where. It was great, but it takes too much effort.

I don't know if better tooling could help, pointing out subscriptions and things like that so you can easily check if you are still using it and cancelling. How do we fix this without requiring everyone to manually keep a checkbook.

Too much effort? Takes me maybe 30 mins a week. Seems like very little effort in exchange for being on top of your finances.

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.

Having ADHD and Autism even something as simple as 30 mins a week can be a lot of effort when it isn't the thing I'm hyperfixating on.

I've only started using YNAB the past few years, any bank that has a Plaid connection can be automatically imported into YNAB. They still recommend period manual reconciliation to catch any import errors (which I have seen, but rarely).

Yea that is sorta what I'm talking about. The previous version didn't use Plaid and required you to manually enter everything. This forced me to be on top of it. The new Plaid version was a lot more automatic and required far less manual work, but also meant I was less involved and therefore less on top of things.

> when I was using the old YNAB which required manually entering all purchases and manually reconciling your account.

I still use YNAB4 after their online YNAB solution's monthly cost got too high. I didn't do it at the time, but now I just import bank statements. It's not too bad, not quite as slick as the new (relatively, anyway) online YNAB. I still prefer to have this level of insight on my finances and spending though.

> I don't know if better tooling could help, pointing out subscriptions and things like that

I don't use it, but Rocket Money advertises this as one of their main features.

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.

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.

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.

Indian Govt. forced the companies to create an e-mandate. At start it was chaos, but I think overall there have been savings. From the article: https://support.google.com/pay/india/answer/11040246?hl=en

"Due to Reserve Bank of India (RBI) regulations, automatic payments in India will be limited to ₹5,000 INR ($60) per transaction. The e-mandate notification also requires Google to set up an e-mandate for your card. This affects all users, but there are some differences depending on whether you're a new customer or an existing user."

Isn’t this about something different from paying off your credit card debt every month?

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 about having to use a CC to build a credit score, or something along those lines, just to be able to get a regular loan in the future? In that sense it could perhaps be seen as a sort of investment?

Genuinely confused (as always).

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.

I use credit cards for all of my spending. One gives me 4% back on fuel, another 3x points on travel and dining, etc. Paying with cash/debit is less economical because you forgo these rebates and incentives.

I also pay my cards in full each month so there are no interest charges, just a few with annual fees that are more than covered by the card benefits.

North American credit cards can have very strong benefits (which merchants pay for in their fees) giving 1-5% back on purchases, and other deals/discounts/perks, so there is a lot more perceived value to using them and (intending) to pay it off in full.

But that also means it’s easy to just keep using the card, and many people don’t actually use the cards to their full extent to get the full perceived value either.

The only economic benefit I see with credits are the rewards/protections it provides for everyday purchases. Here in the states, we don't have a cap on interchange rates for merchants. This trickles down into benefits (For example on my Amex card)

- 1 year extra warranty on top of my purchases, with return protection if the merchant

- Points / 'Cash Back' (much higher multiplier) that can be used to purchase airline tickets or gift cards

This is essentially free money and protections if you use the credit card and fully pay it off, but obviously, most Americans carry balances over and the interest charges basically negate any rewards.

In the US you typically get a kickback ranging from about 1% to 5% for different kinds of purchases. Costco, for example, sends you a check every year based on your purchases, so it makes sense to use your Costco card to pay for everything versus a debit card.

I'm in the UK and have my cc setup to auto pay the full balance each month too. However I use my credit card for everything except my direct debits like mortgage, utilities etc.

Literally everything else is on credit card. I just get much more protection. It I buy on debit card then I need to get my money back (doesn't arrive, faulty etc) it's so much more of a hassle.

In the USA, it's very common for credit card companies to provide rewards or rebates based on your spending. Meanwhile, interest on purchases doesn't begin accruing until 30 days after the purchase.

This means using a credit card is free money. I spend $100 on my credit card, I get $1-3 back depending on what I'm buying, and if I pay in full on my next statement, I pay $0 in interest.

In the US, if you pay your credit card bill in full each month you don’t pay any interest or fees. Most if not all cards give cash back or rewards points in the range of 1-5% depending on the merchant category. So you effectively get a 1-5% discount on all spending compared to paying with cash or debit.

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.

> 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.

In USA it's about collecting rewards points and travel benefits. Airlines and hotels are addicted to the cards.

https://creditcards.chase.com/travel-credit-cards

The interchange fees in Europe are too low to support these kickback games at scale.

So a chunk of consumers use autopay to pay their bills in full every month, and another chunk use it to pay the minimum amount and let the rest accrue interest. I'm not sure how one can draw the conclusion that autopay is at fault here? If anything the lack of autopay would make things a lot worse, because plenty of people in the first set would neglect to pay their bills as well.

This article seems a little fearmongering. Autopay is great, and several credit card companies offer a variety of nice features to help reduce the likelihood of temporary cash flow management issues. Citi for example allows you to split your payment in 2, so if you are paid biweekly, you can arrange your payment dates to align with your paydays.

Personally I turn on autopay for anything whenever possible. (Fortunately, my financial situation has always allowed me to avoid carrying a balance on any credit card.)

I then use YNAB which automatically imports most of my transactions to review my spending every week. That still gives me the opportunity to dispute any incorrect transactions.

The only Autopay that has bitten me are the Wells Fargo credit cards. For some reason, the first payment has to be manually made, even after signing up for Autopay. Ever since then, I always manually make the first payment of at least the minimum.

Am I the only one using Autopay to stave off late fees in otherwise maxed out 18-21 month interest free credit cards (ie, "free" money), then paying them off in full before that grace period ends?

I agree with you, I do this too. But, it is important to understand that this is not suitable for all services. For example, I paid for a streaming service for a month and didn’t like it, and if I forgot to cancel the subscription, I would be charged more money than I wanted. There are also game services with automatic deposit replenishment, this is very dangerous for your finances. Therefore, I choose services on the https://casinosanalyzer.com/online-casino-worldwide website that are reliable and proven and I know that my money will be in order. Automatic wallet replenishment is a function that businesses use to make extra money, and I try to avoid it with this in mind.

My solution: I set all CCs to generate bill on 1st/2nd. Immediately after receiving salary at month end. Than pay them all manually in one go 3rd to 5th. Very less overhead /head scratching.

My biggest gripe against autopay is when the vendor provides a discount if you provide your autopay details.

That's on top of penalties for paying late or penalties for declined payments.

For those of us without a subscription: https://archive.ph/4IyOF

Independent of spot-on analysis by @crazygringo,

my own immediate reaction was, "excellent!"

The system is working as intended. I don't want to manage my f---g credit card bills. I want my computer do this sh-t.

Besides a couple of yearly digital subscriptions I don’t use autopay. I do everything manually. I still hand a money order to my landlord. I like doing errands and getting to know everyone.

I wonder who they mean by "we"?

Everytime I set some new bill such as the mortgage, insurance or utility on autopay I add it to the total in my head and consider that amount as already gone each month. Then I just never think about it again. However, I always make sure anything on autopay is the maximum owed amount per month to never accrue any interest.

Then I consider credit payments the same as debit payments. The money is just gone as soon as I pay for an item.

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