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"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
by 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.
- neogodless 3y agoAh this helps! Yes I pay my full statement balance on the due date (in most cases.)
- ghaff 3y agoI 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.
- WendyTheWillow 3y agoExactly; it's effectively the same thing but with a rolling one-month interest-free float.
- chrisnight 3y agoThe 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.
- AniseAbyss 3y ago[dead]