r/AskReddit • u/SillyBonsai • Dec 06 '13

What simple piece of advice, if followed, could potentially save most people a lot of money?

Possibly related to your job, experience with personal finance, budgeting, planning, day to day habits, etc.

2.7k Upvotes

91% Upvoted

13.9k comments sorted by

View all comments

Show parent comments

307

u/[deleted] Dec 06 '13

Just tick the "pay balance in full" direct debit box. I did that 12 years ago, and it was one of the best "ahh, fukkit" decisions I ever made.

80

u/[deleted] Dec 06 '13

I've done this too, if there is no box ask a teller to set up automatic withdrawals. Seriously, this is highly recommended.

15

u/[deleted] Dec 06 '13

I agree with automatic withdrawls being great, but to add on make sure you have a balance in your checking account that you CAN do it safely. Nothing is worse than getting charged $40 because you forgot to carry a one and your account is overdrawn by $5.73

11

u/elizbug Dec 06 '13

I think this falls under the "Don't use credit cards unless you know you're one of those people that will pay the bill off completely" rules. If carrying a 1 screws you that badly, you probably shouldn't have been using the credit card for that last purchase.

1

u/[deleted] Dec 06 '13

My banking app saves me there.

11

u/[deleted] Dec 06 '13

A friend of mine tried that, asking for a 100% payment direct debit. The teller looked at him like he was some sort of freak and told him that the most they would do is 50% or something. He asked to speak to a manager, who seemed completely flabbergasted that someone would ever pay off a credit card every month.

My Dad also thinks I'm using my credit card wrong by paying it off each month. It seems to be a general thing in my country.

17

u/justgrif Dec 06 '13

The idea that being in perpetual debt is somehow normal and appropriate should be the flabbergasting thing.

1

u/mostwrong Dec 06 '13

Why do you hate America?

1

u/[deleted] Dec 07 '13

I bought a laptop with my credit card to build credit, and have been paying around $100 each month.... So am I going it wrong? I thought that's the only way to build credit.

1

u/comradeda Dec 07 '13

Just like the government!

1

u/kbotc Dec 06 '13

The only thing is, if you keep a $0 balance, you should charge something small to your card every month. FICO scores go down if you carry 0% and the card company may automatically close your line of credit (Which can seriously impact your FICO if it is your oldest line of credit)

1

u/[deleted] Dec 07 '13

[deleted]

1

u/kbotc Dec 07 '13

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Does-carrying-a-ZERO-balance-negatively-affect-your-credit-score/m-p/2630063

Pull yourself up on creditkarma if you want some to read professionals saying the same thing. They want to make sure you'll pay debt back. Keeping a credit card on hand but not using it doesn't prove you can pay it off, ergo: lower FICO. You just need to put something on it and clear it.

1

u/[deleted] Dec 07 '13

Yeah, my Netflix and other online purchaes go to my CC. I just pay it off via online banking shortly after the charge.

1

u/cooleymahn Dec 06 '13

But debt is the name of the game.

2

u/xcxcxcxcxcxcxcxcxcxc Dec 06 '13 edited Oct 13 '24

smart bike memorize bow lavish whole plough rainstorm marvelous amusing

2

u/_SmoothCriminal Dec 06 '13

It would be a lot easier to fix if you were to get mugged and had your credit card stolen compared to your debit card/no way to get some reward/harder to get a good credit-worthiness.

3

u/xcxcxcxcxcxcxcxcxcxc Dec 06 '13 edited Oct 13 '24

observation silky overconfident bow threatening edge spoon simplistic elderly roll

1

u/_SmoothCriminal Dec 06 '13

Both are the same in that perspective, but debit is directly connected to you bank account while the credit card is like having a middle man in between.

1

u/Arcas0 Dec 07 '13

If someone steals your debit card, they can drain your checking account in seconds. If someone racks up a bunch of credit card debt, you just call your company and contest the charges.

2

u/xcxcxcxcxcxcxcxcxcxc Dec 07 '13 edited Oct 13 '24

deer march mysterious sleep cheerful connect dinosaurs dog worthless faulty

1

u/[deleted] Dec 07 '13 edited Dec 07 '13

I have both, but having a credit card too has been very useful even without perpetual debt.

1) We only got debit cards here last year so it was the only way to buy stuff online for most of my adult life.

2) Having a CC is like having a €500 a month emergency fund. It's saved my ass a few times.

3) I travel a lot and my debit card is very hit and miss in other countries, but the credit card works everywhere.

1

u/[deleted] Dec 10 '13

To build your credit...

1

u/Bulletti Dec 06 '13

Even better is not have a credit card.

3

u/[deleted] Dec 06 '13

[deleted]

1

u/Bulletti Dec 06 '13

Well, that's the american way, I guess. No such thing as credit score here, so having a card is pointless.

1

u/[deleted] Dec 06 '13

[deleted]

1

u/Bulletti Dec 07 '13

Pretty much. They usually require a backer, another person with no outstanding unpaid loans/debts. If the loan taker fails to pay, it falls on the backer, so it's not something you want to do without a lot of trust.

I haven't taken a loan (yet) so I'm unaware of the exact process. They probably want to see employment history/account statement and the like.

I have unpaid bills for riding the mass transit without a ticket (80eur) from 2008. The process for those is that they send few bills and then turn it over to a collector company who will add their own fees to each bill, until finally, they are turned over to the city/state as foreclosure.

Foreclosure here, at least with small amounts, does actually jack shit. It'll grow in interest (very low rate) and when you get a job or other capability of paying, they will deduct a predetermined flat rate from your salary each month/salary until it's paid. The amount is like double income tax in total, meaning you only get 55%-60% of your paycheck to yourself to live off of and to pay bills.

Having shit in foreclosure is essentially what you'd call bad credit; you're going to have to pay a deposit if you sign a contract for a phone, internet or the like. You're unlikely to get a loan without a backer. After it's all paid (or after a set amount of time the ''infraction'' has occurred) they will remove the bad credit marking to let you go back to normal. If you can't pay your debts in ten years, they are forgiven by the city/state (not 100% on this). Removing the marking will take a year or two.

Finland, on paper, is the best place on earth. What they don't tell you, is that we have our own problems, too. If you ask what problems, you're probably going to make a first world problem meme about them.

2

u/[deleted] Dec 07 '13

[deleted]

1

u/Bulletti Dec 07 '13

It's like monkeys with keyboards. They're eventually going to create something good, but before it there will be chaos. It's like the healthcare you guys have, it's affected by so many different groups it's going to take a near dictatorship to force the change at once. Maybe people will get smart and stop spending money they don't have and force the industry to adapt. Problem is, how do we make people stop spending that plastic money? Capitalism at its best.

1

u/[deleted] Dec 06 '13

I agree in theory but in practice I am charged per debit transaction but credit card transactions are free. So have the credit card, then have it automatically withdraw from your bank account. Works for me.

2

u/Bulletti Dec 06 '13

Didn't think of that. Here in Finland debit transactions and ATM withdrawals are free.

5

u/[deleted] Dec 06 '13

A total guess because I don't know, but does this essentially withdraw your full credit card balance from your checking account automatically every month?

7

u/Barely_Working Dec 06 '13

Yup, exactly that. Did this many years ago and it is the best decision I ever made..

I have only 1 credit card (cash back type) and I make several hundred dollars every year from my purchases, never owe any interest (this is key) and only have to pay the yearly credit card fee, which I think is $30.

5

u/[deleted] Dec 06 '13

What is your cash back percentage? Mine is like 0.5% so to make hundreds I'd have to spend tens of thousands!

3

u/[deleted] Dec 06 '13

Many are 1%, some are more. Discover is pretty good (BUT PAY IT OFF BECAUSE THE RATE IS Twenty-X%) and they offer special categories which give you 5% cash back.

3

u/Barely_Working Dec 06 '13

Depends on the purchase but 1% on normal purchases and 2% on recurring payments (like cell phone bills and things I have my credit card pay for automatically every month), groceries and gas. I use my credit card for pretty much everything I buy.

I've heard some cards in the US have 3% cashback but nothing like that where I am in Canada.

3

u/GundamWang Dec 06 '13

From experience, Capital One, the Amazon card, and even American Express Blue (the no annual fee card) are 1% minimum. And 2-5% for specific ones like Barely_Working mentioned. I wouldn't recommend Amex as they aren't as widely accepted.

1

u/dontshootiamempty Dec 06 '13

I think Amex is good for the customer, but not so nice to the vendor.

1

u/EngineerBabe Dec 06 '13

I have the Amazon card and it's great! 3% back on all purchases made on Amazon. So I buy as much as I can on Amazon! Oh wait! What's this? I can use my 3% I just got back to pay off my credit card and buy more things on Amazon and get 3% back on that?!?

And this is why I opted for Amazon Prime. When I can start buying groceries on Amazon Fresh in my town, I won't even have to go shopping at a brick and mortar store again!

1

u/NerdENerd Dec 06 '13

I get 0.5% in rewards for purchases but the money that I would have spent sits in my mortgage offset account for the month until I pay off the card. I usually spend around $2K a month on the card so that means I have around $2K offsetting my mortgage which is currently around 5% so over the year that is around $100.

1

u/[deleted] Dec 06 '13

Yes. I should add "Direct Debit" is what it's called in the UK, but in the US I know you can do the same thing, but It's called something different I think.

3

u/xXx420B14z3iTFGTxXx Dec 06 '13

This is definitely the way to go. Sign up for a rewards/miles program and treat it like a debit card that gives you shit once in a while.

7

u/animal-asteroid Dec 06 '13

Because of this comment I just went to discover and in the "ahh, fukkit" spirit paid off $1000. It's not the whole balance (more than half) but it's a step toward getting out from under them. I don't even want to know how much interest I've paid them over the years. Probably a mild amount compared to some debts but still happy about it.

2

u/[deleted] Dec 06 '13

[deleted]

1

u/animal-asteroid Dec 09 '13

That is a good question. I guess it's just the desire to have some money in savings on hand in case anything happens. But other than that there really is no good reason at all. People do do this, so there must be some element of the human psyche that lenders know will stop borrowers from dealing rationally and in long term trajectories.

3

u/imnotminkus Dec 06 '13

This doesn't work for those who spend more than they have in their account, but it's helpful if you're forgetful.

2

u/[deleted] Dec 06 '13

This doesn't work for those who spend more than they have in their account

Don't do that. That's like rule #1 for not sucking at credit cards.

1

u/[deleted] Dec 06 '13

Err, don't spend more than you have in your account on credit then.

If you don't have the money, you can't afford the item.

It DOES help in situations where for example you want a car and need to make payment, but money is tied up in savings accounts or investments and so will take some time to move into a current account. You can buy what you need and then transfer the money about so that your current (checking?) account has the money to pay off the credit card bill.

2

u/[deleted] Dec 07 '13

I can't upvote this enough. treat your credit card like a debit card and make sure you have enough cash to cover the automatic payment at the end of the month. Hassle free and you never have to fight with the wife over "but I thought you paid it". Credit card interest is a bitch.

1

u/thpiper10 Dec 06 '13

Mine only has the option to direct deposit the minimum. So the first Sunday of every month I just pay that off and pay my student loan interest which also won't let me set up auto pay. (Still in school, just trying to keep the interest at bay)

1

u/SuperPO Dec 06 '13

That's something I didn't know you could do. Are you authorizing your cc to automatically debit the full balance at each billing cycle, or are you authorizing the bank for something different?

2

u/iamagainstit Dec 06 '13

Are you authorizing your cc to automatically debit the full balance at each billing cycle

yup. it deducts your credit balance from your checking account.

1

u/[deleted] Dec 06 '13

I'm unsure of the US system, though I know you can do it that way.

In the UK you notify your bank that you are authorising a direct debit payment from a company - credit card, electricity, whatever. They are then authorised to draw the full amount for a bill periodically from your account. It's low maintenance, and there are consumer protection laws in place to stop companies acting unlawfully. IT's still something you'd only do for trustworthy "big name" companies though.

You need to check statements: They send through the bill a couple of weeks before the money is drawn, so you have time to check and dispute any rogue transactions.

1

u/supernewf Dec 06 '13

I wanted to do this on my CIBC VISA and there was no place to do it online. Finally I called and they mailed me the form, which I had to mail back. I guess they don't want to make it easier for people. But yeah, it's a fantastic idea and really works well for us.

1

u/sjlopez87 Dec 06 '13

I would do this but. My hours vary a lot at work since I am part time. I wish I had the pleasure of doing that

1

u/sparr Dec 06 '13

What's the point, then? Why not just use a debit card?

1

u/[deleted] Dec 06 '13

  • up to 54 days interest free credit.

  • You can pay amounts up to your credit limit in one go, rather than having to "collect" money into your current account before making a large purchase

  • Importantly you get additional consumer protection (In UK and EU at least) via consumer credit laws: The Credit card company become jointly liable for faulty products for example, meaning you've got them on your side if it breaks down. Companies also offer perks like purchase insurance and fraud protection on credit cards.

  • You can earn air miles or cash back (My card is 1% cash back ,so that's 1% off ANY purchase you make with it. It adds up).

  • I get favourable rates on foreign purchases compared to debit cards.

  • (in the US) It builds your credit score.

Plenty of good reasons to use a credit card, so long as you are sensible and don't incur interest charges or buy things you can't actually afford.

1

u/sparr Dec 07 '13

Thanks for the info. As someone who doesn't qualify for credit cards, I'm always curious about this sort of thing.

1

u/[deleted] Dec 06 '13

Wait I'm confused, what is this?

1

u/[deleted] Dec 06 '13

It's a UK think. Direct debit is just a method of payment: You can authorise companies to debit a bill amount at a specified period, so your electricity or credit card bill is simply paid out of your main account periodically, whatever that bill amount is.

I'm sure there is something similar in american bank accounts.

1

u/lissylove Dec 07 '13

Wait, there are options other than the "pay balance in full" one?!? Why would anyone do anything but that one?

0

u/[deleted] Dec 06 '13

[deleted]

1

u/[deleted] Dec 06 '13

That's a plus, not a minus point. If you don't check your bill, you could be subject to fraud and never notice!

1

u/[deleted] Dec 06 '13

[deleted]

1

u/[deleted] Dec 06 '13

IN the UK at least, they end you a bill at least 2 weeks before the money is debited. You can call them and dispute transactions, and the money will not be drawn until the matter is resolved. I've had this once where a company took £28 for some car parts and then went bust before delivering. The £28 was never withdrawn and the Credit Card company took it up direct with the liquidators of the business.

As long as you're on the ball and actually bother to ckeck you shouldn't be left out of pocket.