Understanding autopay and weighing your options.

<div class="block">With so much going on in our everyday lives, it can be easy to forget to pay a bill. Autopay can make your life a bit less stressful but there are a few things you should. Brent Weiss, co-founder and head of financial wellness at Facet, joined &#39;Stretching Your Dollar&#39; to talk about how people can benefit from using autopay and which bills you should consider applying this form of payment to.</div>

Stretching Your Dollar

Stretching Your Dollar: What Are Your Autopay Options

When we're faced with bills, many of us opt for the ease of auto pay and that's setting the monthly payments for our cell phone and streaming services among others to come right out of our savings account or charge to a credit card. But that approach might be coming at a cost making it more difficult to manage our money. So joining me now to walk us through, why is Brent Wise a financial planner and co founder and head of Financial Wellness at Facet uh Brent, it's great to have you on the show today and with nationwide credit card debt where it is auto pay sounds like it might be a smart choice at least one of convenience. But is it really the right option for everyone? Well, you make a good point. First of all, we just surpassed a big milestone $1 trillion of credit card debt. Earlier in 2023 consumers are, are paying in interest and fees over $100 billion per year. So when I think about is auto pay a good, a good idea for people. I think the first thing is auto pay, meaning it's gonna automate your payment of the, of the, of the credit card fee or the credit card payment. I think it's a great last line of defense for you. Should it be the first thing you set up? Probably not, but it's a great line of defense to make sure you don't miss a payment. Look, auto pay works really well for fixed payments. So student loans, car payments and even mortgage payments because they're set and they're fixed. Auto pay is usually not the best way to handle the more variable payments which we tend to put on our credit cards. Those are our monthly expenses. So we should be careful there. I will say this important point. It's not an excuse to ignore your spending or what you're paying every single month. It's really important to put yourself in control of your finances and your credit score. And last, but not least when it comes to auto pay or no auto pay, I always talk to people. It was for 20 years. I talk to people about understanding their own personal style. We're all different in terms of how we approach money. Are you a planner or are you more spontaneous? Knowing your style can help you understand if auto pay will work for you or if it could set you up to not pay off their credit card bill and pay a little extra in that credit card payment every single month. Ok, good to know. So obviously each company each service would vary a bit but explain the typical payment options when you do opt for auto pay and what makes the most sense? Yeah, so great point. There there are essentially three things you have to know here. Number one is the the required minimum. Ok. So this is a, this is fixed by each credit card company. It's typically a percentage of your credit card balance. All right. Now this is gonna be a small payment every month. It will not pay off your balance. So my opinion is not the best thing to do because it will be the most expensive option for you because you're gonna, you're gonna keep picking up that interest every single month on the balance and the average credit card interest rates about 23% these days. That is a big expense for you. Number two is a custom amount. So this puts you in complete control. You choose the amount you pay every single month and it gives you flexibility. But again, it's gonna be a little expensive because it generally means you're not paying off the full balance of your credit card. So it puts you in control, but it might leave a little balance out there. What I'll share is this works really well. If you have an out standing balance, you're trying to pay down over time setting a custom amount that fits your budget, your monthly expenses can be a great option. Now, the third option is my favorite which is paying your, your balance in full every single month. Right? That means you're not paying any interest. It also is, it means you're building a good credit score because you're making your payments. So paying your statement balance in full every single month is the ideal way. I understand. That's not possible for everybody out there if you have to put some money on your credit card. I understand that. But make sure you find a solution for you. Avoid the required minimum, try to pick a custom amount to start knocking down that credit card balance or again pay your statement balance in full if you can. Ok. So that's a good breakdown. Are there certain bills Brent that you think are worth using auto pay for and then others that are just like a definite, no, don't go with auto pay for this particular payment. Yeah. So I think the most important thing is I, I mentioned this a minute ago. You know, there, there are some ticket items in our lives, student loans. Of course, that's a big topic because they just started back up here in October. You know, car loans are generally sort of auto pay mortgages or auto pay. Um I don't have a problem with auto pay, especially if you're on top of your finances, but I will always say if they're more variable. So your monthly expenses every single month and I'll give you a look I've been a financial plan for 20 years. I have a system that works for me. It's not right for all of the members that I represent here at Facet. What I do every single month is I know a balance that I wanna spend and I pay it on the first of the II, I pay my credit card on the first of every single month because I go back, I look at my balance and I have auto pay set up as like a line of defense in case I forget or I get busy or something happens most of the time if it's fixed and it's part of your daily sort of monthly routine. Auto pay is great. And by the way, auto saving is a really good thing too outside of credit cards. If you can save into a 401k or a Roth Ira automating, no savings is a great hack to get you back on track with your finances. Ok. So do you recommend the first of the month, the first day of the month for all of our viewers making those payments and certainly checking your balances then? All right. So I, I always say this as a financial planner, I pro I promise it's not a cop out. I say it depends, but let me walk you through a couple of options. So I just mentioned, I make mine on the first of the month. That's, and I pay my card, credit card, uh, credit card bill in full every single month. On the first. That's my system because I look at my previous month spending and I go, am I above or below the number that I set for myself? That is a great system for me that might work for, uh, work well for you as well if it fits your overall system or your style. Um, what I'll share with you too, what I've seen that have worked well for other people is matching your payments to days when you get paid, right? So you can always knock it down, paycheck comes in and you want to pay off that credit card bill before you pay 23% in interest. And it's a good way to keep a cycle of if you get paid on the 14th or every two weeks or whatever it is. The third option is similar to that, but picking days of the month to create consistency in terms of when you check in on your credit card bill because by the way, creating a healthy habit is always good, healthy behavior when it comes to our money will prove to be a great skill set down the road. So maybe the 15th and 30th of the month, it's easy. It's consistent. It sort of matches generally with how you're paid. Um And remember this, your credit card company is gonna give you a billing cycle. So, and it's always these wonky days. It's like the fourth and the 15th or the 21st. That's just when the payments due, you're in full control of when you pay your credit card balance. Don't miss that, uh, that due date for the bill cycle, but you're in control of when you choose to pay your credit card balance. So make sure it fits your pay like your pay cycle, your, when you manage your expenses the first of the month, whatever works for you. The most important thing is find a system or a process that works for you and then stick with it. Yeah. Ok. So what happens, Brent, if you do find yourself in financial trouble, you're fearful that you're not gonna be able to make some of these payments. What's the best course of action? Yeah, I love this question. So I mentioned this. I've been a financial planner for 20 years. A lot of times what happens when new members come to me and say, Brent, what should I do? What I say back is look, prescription without diagnosis is cause for malpractice. So sort of set it another way. We first have to identify the root cause of the issue that you're facing because look, we all have different situations. Did you just get married? You just started a family, you bought your dream home, maybe a period of, of income loss for, for you and your household. The first thing to do is figure out what has caused the issue in terms of maybe staying on track or getting back on track with your credit card payment right from there. You can then identify and go ok. What is the thing I have to change or get through or really make sure that I'm tackling in my own personal financial life to get me back track back on track with all of this right now. Here's the thing. If you're really struggling with this or you're just not sure what to do. Number one, call your credit card company, by the way, I did this 20 years ago in college. I kid you not. My professor said, call your credit card company and ask them to lower your interest rate. I called them and they lowered it. Call your credit card company. There's no shame in that to see if they'll work with you to lower the rate or help you make payments. Um, and the, the other thing here too is if you, if you need this and I'm gonna say talk to a professional, I'm biased in my opinion as a CFP professional myself. But really it's about creating an environment, having the people around you that will support you and help you make the right decisions when it comes to your finances. We are never taught this stuff in school and we kinda have to figure out this adulting thing as we go through and this money thing. So those are some important tips the last thing I'll share with you if you're really struggling with credit card spending is get rid of the credit card, don't close it because it's good for your credit score. But get rid of that credit card may move to a prepaid card or a debit card or quite frankly, this is gonna sound archaic pay with cash because there's an extra pain point every time you, you put a couple of dollars down to pay for something emotionally. That might be a better, a better piece, one piece of warning to. Ok. Yeah, go ahead, please Brent such good advice. We're gonna leave it there. Thank you so much, especially as the first of the month approaches sooner than we know. Thank you.