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Autopay is making us worse at managing credit-card bills
- jawns 3y agoThe 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!
- crazygringo 3y agoThat 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.
- Dobbs 3y agoNot 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.
- damontal 3y agoToo much effort? Takes me maybe 30 mins a week. Seems like very little effort in exchange for being on top of your finances.
- ghaff 3y ago30 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.)
- Dobbs 3y agoHaving 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.
- michaelmior 3y agoI'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).
- Dobbs 3y agoYea 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.
- HelloMcFly 3y ago> 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.
- nerdkid93 3y agohttps://archive.ph/4IyOF https://archive.ph/4IyOF
- mcast 3y agoThe 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.
- LorenPechtel 3y agoAnd 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.
- LeafItAlone 3y ago> 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.
- ricardou 3y agoI 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.
- JKCalhoun 3y agoAgree. Autopay is an invisible gremlin reaching in and taking money from me every month. Nickelandimeism is apparently the new economy.
- WendyTheWillow 3y ago…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.
- lazide 3y agoIt’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.
- WendyTheWillow 3y agoI 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.
- lazide 3y ago
- Analemma_ 3y agoOne 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.
- variants 3y agoYou 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
- Salgat 3y agoI started using Mint which summarizes all your transactions across all accounts which is nice. No more surprises on what is going on.
- Freedom2 3y agoThis is a standard feature for many banks with quality phone apps. It's also good for alerting you instantly if your card is compromised.
- delecti 3y agoI 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.
- matwood 3y ago> 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.
- johnea 3y agoI wonder who they mean by "we"?
- izzydata 3y agoEverytime 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.
- crazygringo 3y agoThe 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.)
- Rapzid 3y agoI auto-pay with minimal and log in at the beginning of every month and pay the full balances.
- CydeWeys 3y agoWhy 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.
- michaelmior 3y agoNot 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.
- sxg 3y ago"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.
- WendyTheWillow 3y agoIt’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.
- lazide 3y agoIt can also be the equivalent of picking up pennies in front of a steam roller.
- neogodless 3y agoWhat 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.
- ghaff 3y agoI'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.
- redblacktree 3y agoI 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.
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- nerdkid93 3y agoThis 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.
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- aaroninsf 3y agoIndependent 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.
- ccooffee 3y agoArchive: https://archive.ph/20231008050640/https://www.wsj.com/personal-finance/autopay-money-management-credit-cards-c546b62c https://archive.ph/20231008050640/https://www.wsj.com/person... Cited research: https://kenaninstitute.unc.edu/wealthinequality/wp-content/uploads/2023/05/Wang-_-To-Pay-or-Autopay.pdf 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.
- cratermoon 3y ago> this conclusion is based on less creditworthy cardholders. Who are exactly the target of most of the abuse in the credit industry.
- lazide 3y agoMost industries frankly.
- globular-toast 3y agoI 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.
- ww520 3y agoI 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.
- michaelmior 3y agoPersonally 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.
- d3vmax 3y agoIndian 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 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."
- actionfromafar 3y agoIsn’t this about something different from paying off your credit card debt every month?
- andrelaszlo 3y agoI 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).
- qingcharles 3y agoDebit 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.
- redblacktree 3y agoI 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.
- dpiers 3y agoI 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.
- TheGeminon 3y agoNorth 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.
- ramshanker 3y agoMy 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.
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- paxys 3y agoSo 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.
- slowhadoken 3y agoBesides 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.
- jcolella 3y agoFor those of us without a subscription: https://archive.ph/4IyOF https://archive.ph/4IyOF
- inetknght 3y agoMy 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.
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- Jcampuzano2 3y agoI'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.
- graton 3y agoI 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.
- charlie0 3y agoAm 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?
- WhiteSabbath 3y agoI 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 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.
- jbombadil 3y agoI 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.
- charlie0 3y agoThe 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.
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