Credit Card Payment question
Hi all, I'm a somewhat recently credit card debt free person and I will forever stay that way. I was in a cycle of credit card debt for years and I'll never go back! I still use credit cards within my budget for the cash rewards and I've been doing that responsibly for the past year. I pay them off and never carry a balance, but I have a question about how everyone does that. It seems like the FI community is pretty credit card friendly as long as they are being paid off, but can anyone share logistics with how they do that? I track my spend on Monarch Money so that I never go over my spending categories. I've been paying them off weekly but I don't know if thats too excessive? I net about $120 in credit card cash rewards monthly by putting all of my groceries, insurance and household expenses on credit (all tracked and budgeted). I get high cash rewards for groceries and gas. I haven't gotten into travel rewards because I'm not able to travel at this stage of life (young kids and medical needs), but I'm interested for the future.
Can anyone share their process and maybe I'll find something that works for me. I would like to find a better process for paying them off monthly and I'd love to hear what the community is doing. Thank you!
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I actually set my cards up to pay automatically only the minimum out of my checking account. This is just to prevent any missed payments.
Every couple of weeks or so, I'll check in on YNAB and see if there's a largeish balance and if so, pay it off. All of my cards also helpfully display the "remaining statement balance" (as opposed to the remaining balance) as well as the due date, so I know that as long as I pay that much by that date, I won't owe any interest.
Every now and then I'll forget to pay it all off and I'll owe a small amount of interest (less than $5), but I think that it's still worth it to do it this way instead of auto paying the full balance every month. I sometimes have large bills come in that exceed my checking balance, and I don't want that full amount coming out when I don't expect it. I'm happy to pay a small, occasional amount of interest for the freedom to completely stop paying attention to my checking and credit card amounts for a couple of months if I need to (which happens sometimes…busy work project, death in the family, etc, big things that take all my emotional focus).
Thanks this is helpful. This sounds more hands compared to what I'm doing now which might be best for my mental health. Since most of my hh bills are on the cc, it is stressful to set it to pay all automatically. I'm considering just keeping more in checking.
I have four different cards for different rewards (5% grocery, 5% Amazon/Whole Foods, 4% dining, 3% everything else). I actually find it easy to just make full payments on balances weekly or even more often. It doesn’t feel like a chore, but I did take the time to set them all up in Quicken Classic so I can easily spot which card has which balance whenever I want to look at it. I’ve tried out the newer cloud based budgeting apps but keep finding that Quicken Classic does a better job of tracking and more importantly categorizing and reporting my spending and budget, to the point where I could also easily spot if my checking account is going to have a problem covering any bills (but that doesn’t come up at all because I’ve been at it for years and my spending is well controlled).
Hi, can you share which card that you have offers 5% on groceries, 4% on dining and 3% on everything else? I need to sign up for that card.
Sure happy to. As I mentioned, these are different cards, not one card. 5% groceries is actually PayPal debit which pays 5% back on your chosen category, 5% on Amazon and Whole Foods is Chase Prime Visa, 4% dining is actually a legacy version of Capital One Savor, so I don't think that one can be obtained today, 3% on everything is Aven (you have to ignore their attempt to market you a home equity line of credit and specifically apply for their unsecured credit card).
sounds like paying them off weekly works for you. Thank you for sharing your process and some information about your cards.
I personally feel that if you can't turn on automatic full balance payments, then you should wait a wee bit until you have that buffer. I've seen close others that have tried to play the credit card game having recently paid off all the debt and they got sucked back into it.
I'd just wait enough paychecks and accumulate enough of a buffer that you don't have to worry about it.
Once you have no worries about carrying a balance then I think that's a good time to optimize.
Sounds like you have a lot of great comments here, good luck!
We buy most everything with a Capital One Venture X. We auto pay the balance the day before the due date. When the statement closes I run a simple cash flow sheet(showing money in V money out coming up with the next paycheck) to see if I push money into HYSA or pull money out. I do not worry about optimizing during the statement period. We do travel a lot which makes this make sense. Because of balances varying our credit score will bounce around between 810 and 830. This is designed to optimize the interest earned in the HYSA. We also maintain a $1k balance in our checking to account for the possibility of mistakes. Good luck on your journey to FI!
I started off like you paying them off weekly. After a while I found it to be excessive, so went to bi-weekly. For me that seems to be the sweet spot. Credit cards report balances on different days of the month, so paying them off bi-weekly helps keeps my credit score from bouncing around too much.
I keep a spreadsheet with all of our monthly expenses along with our checking account balance. I like to log in monthly to pay all of our credit cards manually (we play the travel rewards game so we have 4-6 at a time). I typically pay the full balance, but if I know we have any large expenses coming up I'll only pay the statement minimum. Keeping the spreadsheet of all upcoming expenses is definitely overkill for most people, but it gives me peace of mind to know what is coming. I have every paycheck, FSA reimbursement, tax bill, mortgage payment, etc. planned out for the year. It seems crazy to my husband but I'm a spreadsheet lover.
I use YNAB to ensure I don't live in the credit card float and that I treat all credit card transactions the same as cash. I have a bi-weekly task in my calendar to pay credit cards. I do this because I just don't like seeing a large balance build up - just personal preference. If my credit card company offered an auto-payment option where it would pay it immediately when the statement comes out I would do that, but my only option is on the due date - that is too close to living in the credit card float for me so I continue to make payments manually. That said, the mobile apps for both cards take about 2 seconds to generate a payment so I don't mind the minimal manual work it takes.
Great job being debt-free!
Thank you for sharing. I use monarch money and it sounds pretty similar to ynab with cc transaction tracking. I feel the same way about the large amount building up.
What I used to do was clear my cc balance to zero every time I got paid. I never budgeted, but it was clear when I spent too much.
I like to keep things as simple as possible. I use YNAB to make sure I'm never spending beyond my budgeted categories, and then have credit card autopay set up to pay it off once a month.
I keep track of all of my credit card charges on a per month basis. I have found monthly to be the best thing for me. I budget monthly and this keeps interest from being applied. I keep them in a spreadsheet based on the budget category they belong to. At the end of the month I pay all of the categories off with my checking account to make it easy to track the categories. Takes me only about 20 minutes to do now that I have been doing it so long but it works for me! Happy to answer specific questions!
We have all our credit cards set to auto pay in full monthly. It's great, we never have to remember or even think about it. We're YNAB users, so we know the money is there to pay.
The crazy thing is - most people have no idea you can do this at all! I've had a boss who was married to an accountant and neither of them had any idea you could auto pay - they got dinged with fees repeatedly for late payments until I told them about auto pay… I even attended financial presentations by professionals who didn't know you could set up to auto pay in full.
Once you realize this, it feels like some sort of cheat code!
While I know that I can pay it off monthly, I choose to pay it everytime I get a paycheck. It gives me peace of mind to see a smaller bill than paying off once a month. Also, I enjoy the semi-micromanage so I choose not to autopay.
It isn't necessary to pay more frequently than once each bill cycle. As long as you pay your statement balance by the statement due date, you won't accrue interest. The only potential benefit of paying more frequently is if you want to keep your credit utilization rate low in order to benefit your credit rating. NerdWallet has a great article about the factors that impact your credit score.
www.nerdwallet.com
https://www.nerdwallet.com/finance/learn/what-makes-up-credit-scoreWhat I do is I have all my bills set up for auto-pay. When a bill is due, the creditor automatically withdraws the full statement balance from my checking account. The advantages of this strategy are that bills are never late which benefits my credit score and I no longer need to worry about remembering to pay on time. This strategy does require you to be able to leave a buffer in your checking account so that as bills fluctuate a bit month to month, you never overdraft.
Each month I reset my checking account to a certain balance that covers my usual spend plus a buffer. If I get a notification that my CC bill will be within its usual range, I don't need to do anything because I know my checking account balance covers my usual spend. If I get a notification that my CC bill will be more than typical (maybe I had an unexpected expense last month) then I can transfer extra money into my checking account in advance of the bill's due date.
Another thing I do is I've enabled notifications on my credit cards and my bank accounts. Any time a charge is made to my CC or a payment is due or a payment is made, I receive a text notification. Any time money enters or leaves my bank accounts, I receive a text notification. This helps me monitor my balances.
Don't worry if auto-pay isn't something you feel able to do right now. Keep it in mind for later on the FI path. For now, if you don't already, consider using notifications to help you monitor your spending and balances. Check if your CC companies and other bills allow you to choose your due date. If they do, sync up your bill due dates so you only have to sit down to pay bills once or maybe twice each month. Spending less time each month paying bills will be a great win.
Sadly, Chase recently eliminated most of their transaction notifications. I was a bit bummed about this, since I also made liberal use of those notifications to keep track of what was going on. I'm thinking specific of certain Amazon Marketplace sellers that have long shipping windows. So I might order something and the charge might not hit the credit card until 2 or 3 weeks later.
Interesting. "Single transaction above $__" is still offered. I actually didn't have that one enabled yet got a push notification about a charge just last week. The web says Chase made that change in February so maybe previously established notifications are still in effect (though maybe only temporarily).
Now that you've pointed that out, I enabled the "single transaction" notification. It won't accept $0.00 but it does accept $0.01.
Interesting. Maybe it was only the card not present transactions that they eliminated. I generally don't feel like I need notifications for transactions where the physical card is present, since I always try to get a receipt. I'll have to go back into the settings and check it out again. Getting notifications for everything is a bit annoying, since what I really care about is transactions that aren't immediately attached a purchase and a physical receipt. But, I might have to learn to live with that.
It was probably the "card not present" notification that I had enabled. According to Google's AI, Chase's intent was "to reduce excessive notifications". Seems like that will backfire since now users wanting to get the same alert coverage will need to do what I did and get alerts for everything. I sent a message to Chase CS pointing this out and asked if they would consider bringing the alert back. We'll see. ;}
Wow, I didn't realize that until you mentioned it. I wonder why the did that?
The message that I received indicated that they viewed the notifications being cut (card not present, primarily, it would seem) as no longer particularly useful, as their fraud detection system is sufficiently advanced to be able to detect potential fraud and alert you to it. Of course, that seems to carry the implied assumption that the only reason people would want those notifications is for fraud detection purposes. 🤷♂️
Thank you, I may consider auto pay. I'm not worried about missing payments, rather that I login too much to pay. I would love to get to a place where it's set to pay off the whole balance automatically