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Living with credit

My new system for making sure my minimum payments get made

Karen Queen

Back in the day, I barely glanced at the minimum payment due on my credit card bills. That’s because I took huge pride in being part of the growing group of Americans (now 64 percent according to an April 2014 Gallup poll) that always or usually pays their bill in full every month.

I also scoffed at the 24 percent of people who do not pay all their bills on time. For credit card bills, one late payment means a $25 late fee plus additional interest — enough for a nice meal out.
My new system for making sure my minimum payments get made
Those late-paying, minimum-only people needed to get their finances in order and get a system. My system: not long after my credit card bills arrived, I sat down and wrote the checks, placed them in a stamped envelope with the due date written on the front ready to be mailed. Then I smugly enjoyed the float — the time between when I made the charges and the payment was due.

Great system. Until it wasn’t.

Work and life got busier. When I wrote the checks, my subconscious counted those bills as paid. But credit card issuers do not consider a stamped envelope with a check still sitting on my desk to be payment in full — or payment at all. Imagine that.

The first time I let a payment slip, my credit card issuers were sympathetic and waived the late fee. I knew a second offense could be costly both in late fees and the potential for higher interest. (For more on that, see “Chronic late credit card payments: How bad can fines, fees get?“)  

My system was failing and eating into those nice meals out.

“Not only will you pay a late fee, but if credit card issuers start recognizing in their books that you’re consistently running late, they can raise your interest rate,” says Maxine Sweet, president of public education at credit reporting agency Experian. “You’re showing as a higher risk. In their defense, you’re costing them money.”

So much for my pride. I needed a new system that worked.

My goal: get that minimum paid early and still enjoy the float on the rest of the balance while maintaining control over my finances. I first tried mailing in the minimum payment due as soon as the bills arrived. But that added another step to my busy life. Paying online still left open the possibility that I’d forget. Automatic payments in full seemed like a great idea until I remembered the rare times when I needed two months to pay off the balance — I wouldn’t want to worry about an automatic deduction of a huge payment that I couldn’t afford that month.

My new system: setting up automatic payments for the minimum due each month while still receiving a paper bill that I’d pay in full when due. I spent an hour on the phone talking to our four credit card issuers. American Express talked me through their online system to set up minimum automatic payments. One Visa issuer mailed me a form. Two credit union card issuers emailed forms.

Bill lost in the mail or more likely lost on my desk?  The minimum payment is taken care of. On vacation and miss the bill? The minimum is paid. Dog chews up the mail? (It did happen once. Really!) No worries. I still get to ride my precious float and maintain control over our finances.

Sweet gave thumbs up to my new system as long as I didn’t start taking things for granted again.

“I think it’s a great idea to set that up as a safety net,” she says. “My only concern is: don’t get lackadaisical about that and think ‘Oh it’s been taken care of — I’m not going to worry about that bill now.’ When you’re paying only the minimum payment, you’re paying the highest finance charges you can pay on that balance in traditional financial services.”

No system substitutes for common sense. Moving forward, I will continue to look for systems that help me pay bills, save money and maintain control over our finances. But I’ll set aside my pride and make sure I’m not causing system failure.

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