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Should you set up automatic or manual credit card payments? Are their pros and cons for one vs. the other? Which one is better overall? I run into these questions fairly frequently and despite me sounding cliche, the answer is, ‘it depends’.

I want to say “automatic payments are king” and list out all the benefits. But when it comes to personal finance, we all come from different backgrounds and philosophies. I want best attempt to provide solid financial principles more than anything else.

Having a strong financial foundation is necessary for the long-term growth of money/net-worth/reduced debt/finance goals.

This article is ideal for those who are starting to get familiar with credit and are curious to take the plunge into having a credit card. I’ve already discussed how credit cards have a bad reputation but can be advantageous at the same time.

Automatic vs Manual Credit Card Payments

For those who aren’t familiar, you can set up 2 different payment methods.

  • Manual Payments – These payments are set where you manually send your credit card a check for payment or use the internet to pay your monthly bill.
  • Automatic Payments – These payments are done automatically, usually for the statement balance amount.

Both do have pros & cons for each.

My Early History With Credit Cards

When I was 18 years old I was told ‘to get a credit card’ by my mom and for the purpose of an emergency. My limit was $400 and I primarily used it for a World of Warcraft subscription. I would pay my mom the money on the credit card and she would make payment herself.

When I turned 22 years old I stopped using the card and when I thought I paid off my credit cards I stopped looking at my account. A few months after I stop using it, I received a notice that I owe $350 instead of the $220 that was supposed to be paid (late fees & interest add up fast). I was pretty upset on the whole thing and closed my credit card out of spite.

I swore off credit cards from that point on. It wasn’t until I was 25 years old before I took the time to learn more about credit cards and what they had to offer. Since then I’ve gotten familiar with having the right mentality in using credit cards for my benefit.

When “Manual” Payments Are Preferred For Credit Cards

Because of my previous experience, it made me realize that I should have paid closer attention to my credit card payments. By not doing so I would risk hurting my credit score that could dramatically affect interest rates/insurance rates/credit limits.

When you are new to credit cards, you start asking yourself, “what’s a statement balance?”, “will I get charged interest on my credit card if I don’t pay right away?”, “do I pay the current amount?”, “will my credit score get hurt if I make the minimum payment”?

This causes a lot of unnecessary stress to those new with credit cards. This can lead to lack of use of a credit card and no real change in financial habits. In some cases, it’s good if you already have disciple with budgets.

At the same time, it’s a lot tougher to take advantage of the perks credit cards offer if they are used right. Crossing that mental bridge is very tough, especially if you aim to build good habits.  For me, it took one bad instance to shun credit cards for years.

How Should Start Using “Manual Payments” for Credit Cards?

  1. I suggest paying manually when you get your first credit card for 3-6 months
  2. This will help get you into the groove of getting familiar with the credit card’s web platform.
  3. Specifically on months one and two, I strongly suggest making payments to your credit card right away after purchase.
    1. The reason for this that when you use a debit card, you’re decisions are literally tied to the amount of money you have in your account. If you don’t have $10 to your name, then you can’t spend $12 on a new t-shirt.
    2. By making payments to your credit card the same day (or next day) from your bank account, you are reinforcing the idea that you should only be spending what you can afford.
    3. Alternatively, this will give you enough time to get comfortable using a credit card and to start building good habits. YES, it might be annoying at first, but so are most things that require discipline.
  4. For month 3, I recommend paying your credit card every week. You should already have been building good habits of payment. You can start doing manual payments weekly. Month 4 – Pay every 2 weeks.
  5. Month 5 and month 6 is when you can try paying a few days before the due date. Be sure to pay the statement amount. You won’t be charged interest as long as you pay the Statement amount prior to the due day.

So, why would manual payments be preferred to automatic payments?

  1. It’s great practice in getting familiar with using credit cards responsibly.
  2. You can keep control of your finances at all times.
  3. You know when you make payments and you don’t need to worry about being late.
  4. Peace of mind knowing if something doesn’t seem right, you can call your credit card company and they will make it right.

Alternatively, what are the cons of using manual payments?

  1. Human error, sometimes we might forget to pay on the due date and could run into issues with late payments.
  2. If you have multiple credit cards, keeping track of due dates all the time could be tiresome and might bring stress multiple times a month.

When “Automatic” Payments Are Preferred For Credit Cards

It’s been awhile since I started using automatic payments. I made the switch to automatic payments because it’s a lot more convenient for me to do and I only spend about 30 minutes a month balancing my budget.

Why Automatic payments are preferred compared to the manual

  1. No need to spend extra time setting up payment schedules or scrambling across multiple websites to make payments last minute.
  2. You can set up your credit cards to have the same payment dates -> meaning you only need to deal with payments once a month.
  3. Zero risks of getting a late fee when auto payments are set. If you do get hit with a late payment, you can call customer service and they will reverse the charge.
  4. If you set your accounts up to Mint, then you can just log onto the app and see how much you owe at all times. This can help keep you accountable.
  5. You can properly plan ahead in case you need to make adjustments in payment.
  6. It’s a major time saver. Usually, if you are great with budgeting, all you need to do is double check your bank funds vs your credit card payments and you’re good to go.
  7. I recommend this for those who have gotten familiar with credit card payments (on-time) after 6 months.

Why some people prefer not to use Automatic Payments

  1. Don’t trust when credit cards make payments from your bank account before the due date (I’ve never had a case where a credit card takes money out before a due date).
  2. You simply want control of all aspects of your money. There is nothing wrong with that if that is your personal preference that’s all good. But I’d be doing a disservice to not point out that there are tradeoffs.
  3. It can be therapeutic to some to make payments. Sometimes it’s a good feeling to manually make a payment, knowing that you are being responsible.

So, Which is Right For You?

My best tip is that you need to evaluate how comfortable you are with credit cards first. As you get more comfortable, choosing the right type of payment method is ideal depending on how you operate. It’s just a hunch, but I would say if all things were the same, a majority of people would prefer to pay automatically.

What are your reasons to do automatic payments or manual payments? I’d like to hear.

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Manual or Automatic Credit Card Payments