Using Micro-Payments (or, Getting One Up on Credit Card Companies)

[sabrinamari]

Micropayments are an easy, useful strategy for getting credit card debt down fast.

1. They tighten your focus
2. They build momentum so debt goes down faster
3. They generate awareness about your spending patterns and therefore...
4. They enhance your relationship with Element Money

Here's how to use them:

1. If you don't already have one, set up online banking accounts for your checking and savings accounts.

2. If you don't already have one, set up an online account for each of your credit cards.

3. Link your checking account to your credit card accounts so you can easily make online payments.

4. Check your bank accounts and credit accounts once or more weekly so you know how much you have in/on every account.

5. Once a week, make a smallish micro-payment on your credit cards. On good weeks, pay more; on tight weeks, pay less.

Because you are maintaining your focus, you will make better progress while staying flexible and you will never be late on a payment.

Most credit card companies work on a 25-day cycle, not a 30-day cycle. Even if you pay off all your credit card bills monthly, you might still be charged interest if you pay only once a month. If you make micro-payments and pay off your cards continuously, you can avoid ever paying interest.

Other useful tricks:

See if your card allows you to schedule an automatic monthly payment of your minimum on or before your due date. If you can afford to do this, you will never miss a payment again even if you get distracted by life matters.

Some cards only allow you to make 1 payment a week or 1 payment every 3 days. If you you use micro-payments, take notice of rules like these.

My rules:

Never pay interest if you don't have to.
Always make credit cards work for you; never allow them to work for credit card companies.

Comments

[tigira.livejournal.com]

What's funny is that this is pretty much what I did once I could set up online accounts. Every couple of months I'll carry a balance for a couple of weeks because after a full year of never doing so, the credit card company was going to cancel the card.

In general, though, I don't even use it. I keep it for ease in personal travel. Outside of our mortgage and one car payment, M and I don't have any debt, and we like it that way.

[sidhne.livejournal.com]

after a full year of never doing so, the credit card company was going to cancel the card.

That's shocking! What was their reason?

[sabrinamari.livejournal.com]

Wonderful! Like you, I sometimes carry a balance for two weeks---regularly, in fact---but never for more than 20 days. I do this because it's not always convenient for me to pay off my balance in full every week.

I did not know that paying off balances in full could result in credit card cancellation. Thanks for telling me that.

Great job on debt management! It is not easy to make the lifestyle shift required to live without credit card and consumer debt.

I spent many years with alot of credit card debt---and I do mean *alot*. Living without it translates into FREEDOM and peace of mind that I never want to give up.

[siobhra.livejournal.com]

The credit card company is a business and not a 'public' service. The give out cards and loan you their money with the hope of making money for them selves.

Fair enough on that. However those who never use their cards are a drain because the CC company still has to send out statements and maintain records on the card holder. People who pay in full each month never pay a fee or much of a fee are using their money with them getting little or no return.

I see their point and agree with them somewhat. However we (like them) must do what is in our best interest also.

[sabrinamari.livejournal.com]

Yep. People who don't keep a running balance are called "deadbeats" in the credit card industry.

I am proud to be a deadbeat the vast majority of the time.

[siobhra.livejournal.com]

This is about the third or fourth time you mention 'micro-payments' yet don't tell us 'how'. How do you make micro-payments?
If you set up an automatic monthly payment on the minimum will you still get a monthly bill so you can pay more?

How to micro-pay

[sabrinamari.livejournal.com]

Hmmm, look under the first lj-cut above. Once you follow the first four steps, you will have the option to make direct credit card payments online. There will be a link on your account summary page---the page that shows you your current credit card balance---that says something like "Pay My Bill".

When you click on that link, it will usually ask you if you want to:

1. pay the minimum balance
2. pay the full balance or
3. pay some other amount

You can then choose one of these three options. Once you choose on option, it will ask you to confirm the checking account from which you will pay (the account that you linked to your credit card account). If you link more than one bank account to your credit card account, you will be asked to choose which account from which you want the payment to come using a drop down menu.

After you select the account from which you want to pay, it will ask you to confirm the payment amount. When you click on that confirmation, it will show you a new window that says the payment has been made and it will give you either:

1. A confirmation number or
2. A confirmation date

I write these down in my book just in case there are any problems later.

It usually takes 2 days for my online payment to be debited from my checking account and post to my credit card account.

If you set up automatic online payments of the minimum balance, you will *still* receive a paper bill every month that allows you to pay more.

Most credit cards keep sending you a paper bill UNLESS you go online and "turn off" paper bills, replacing them with online statements in the form of PDF files that you can access online as soon as they are ready.

However...once you set up online credit card accounts, it takes only 3 minutes to make an online payment. After a few weeks, you may decide that it's easier to pay online than to pay with a check.

So, just to clarify:

Micro-payments are online credit card payments that are usually *smaller* than regularly monthly payments. You make them every week using the methods that I've outlined here and in the post above. Even though they are smaller than regular monthly payments, they are more regular, so they allow you to stay focused on your goal of paying off credit card debt.

Because you are more focused and paying weekly becomes a habit, you tend to make more progress faster, and you get much more familiar with your money habits.

Is anything about this unclear?

Re: How to micro-pay

[siobhra.livejournal.com]

No, it is very clear. I plan to follow it.
BTW: I copy and paste your advice to a separate file for future use. And I now have the online bank account.

Re: How to micro-pay

[sabrinamari.livejournal.com]

Thank you. I am SO IMPRESSED that you have moved so fast to adopt a new technique. Wow!

Re: How to micro-pay

[siobhra.livejournal.com]

I work in accounting. I should be giving you advice. And I have taken some of the things you have said to our CFO who told me that he too has an online money market account at Flagstar.
We are a Fortune 500 company. Part of Lexis-nexis which is part of a British company called Reed Elsevier.

Re: How to micro-pay

[sabrinamari.livejournal.com]

Wow...

[sidhne.livejournal.com]

Is there an advantage to paying through the credit card company rather than through the bank? I can send payments from my bank and find it easier to manage all my payments. Unless it's faster through the cc company?

EDIT: I get paid every two weeks and pay each credit card all I can afford from each paycheck. Is there an advantage to holding back some for paying the next week? I don't see paying once a week as an option if it means paying more than what I'm paying now.

[sabrinamari.livejournal.com]

There are advantages and disadvantages to each method. When my household started doing online banking some years ago, I set up automatic bill payments through Wachovia (my bank at that time). It took over 6 days for some payments to post. Once, a payment was late because even through we paid a few days early, we did not alot enough time to account for the delay on the bank's part.

After that, I decided to move towards direct payments that I controlled myself for credit cards and automatic monthly drafts for utilities. Now, when I make a payment on a weekday, it usually takes 2 days to post.

I've also set up automatic notifications on my major credit card account:

An automated message system calls my cell phone to tell me when my balance has exceeded a certain amount.
It also calls to tell me when a payment has posted.

Because I had to look at my credit card statements *as they accumulated* to make direct credit card payments, I learned a great deal about *how* I was spending my money---and over time, I changed my patterns as I began to understand them.

The disadvantages:

I have to check 3 online accounts instead of 1: both credit card companies and my Commerce bank account.

I have to make payments twice instead of once: I don't have a central location from which to make all payments.

The credit card companies retain my checking account information. This does not distress me, but I can see how it might bother some folks.

I also get paid every two weeks, and I plan how much I can pay from each paycheck. However, I log into my credit card accounts and my bank accounts about twice a week, and I often find myself making adjustments to my original plans.

Some weeks, that means that I hold back more than I planned from my credit card payments to make sure I have enough to cover other expenses. But other weeks, I find I have *more* cash than expected, and I can make a bigger payment or an extra payment.

In this system, you don't have to pay every single week, but you *must* check all of your accounts (checking, savings, credit cards, HELOCs) at least once a week to figure out what you are doing with your money.

The system allows you to stay flexible and focused as you ask:

"Am I spending the way I planned? If yes, great! If not, why not? What can I afford to pay on my credit card debt this week/this period? What's going on with my accounts NOW?"

The goal is not to pay more at any one time time; the goal is to stay focused, check in more frequently and learn to KNOW YOURSELF financially.

Paying down debt faster is an indirect result of meeting this goal.

[sidhne.livejournal.com]

Thanks for all your great help in this. I have just been to the bank to see about refinancing my HELOC and taking down a few credit cards with it. Turns out I can save 2% on my rate and about $500 on my monthly payment. Of course, I will continue to pay most of that to accelerate payoff, but it will be nice to actually be able to live off my income for a change! Just have to get through the application process!

Once again, thanks and big hugs! I have a very positive feeling about the '08!

[rainbear.livejournal.com]

I've been very good about not using credit if I don't have the cash to use. Keeping my balances paid off has resulted, for instance, in AmEx raising my limit twice in a year.

I notice that my credit score is (albeit slowly) creeping upwards, which, overall, is A Good Thing^tm!

[sabrinamari.livejournal.com]

Exactly. Careful, conscious manipulation of credit raises one's credit score (FICO) and that means one's power in the financial realm expands as well.

For me, a higher FICO means greater power in the sense that it gives me more/better choices.

I guard it carefully, because I want all the freedom and all the advantages I can accumulate through its use.

[rainbear.livejournal.com]

*nod* I figure now and again I'll carry a small balance so to keep the CC company "happy" (given the other comment from siobhra). It's actually... refreshing... not to be in debt. House is paid for, car was paid for in cash, what CCs I do have are all paid off. Now to figure out things like investing lol!

[sabrinamari.livejournal.com]

That's great news! I am so happy for you. {happy dance of joy}

Investing is fun, and it is not NEARLY as intimidating or difficult as it seems. :)

[siobhra.livejournal.com]

This year I drained some my savings to buy Christmas gifts. It is also the first year in my whole life I have not USED my CC to buy anything. I feel great.

[sabrinamari.livejournal.com]

Refraining from buying gifts on credit is fantastic. It means you have a plan and you execute your plan your way, and no other third party dictates to you what you must do about it.

It means no ugly financial repercussions in January! You will not open your January credit card bill(s) with a knot in your stomach, or worse, toss them on a desk because you can't face opening them.

it means freedom from fear and constraint. Go you, you woman of power!

[castalusoria.livejournal.com]

My Citicard was paid off in full every month for the first, oh, dunno, five or six years I had it. They never threatened to cancel it. I've had a rollover balance on it for a couple of years now, and throw money at it a couple of times a month. The interest rate's not the best; I did negotiate a lower rate with them a while back (just by asking for one), the contingency was that it would be revoked with the first late payment. A transfer didn't clear my bank in the "guaranteed" time (and I'd sent it over a week in advance), so they revoked the rate. Annoying.

A note: Citi has a limit to the number of online payments you can make on a given account per billing cycle-- in my case, two. So I can't actually pay online every week. I'm thinking of doing online payments twice a month, and mailing a check twice a month. Haven't totally decided yet. But I'd like to distill this card down (only other card I have is one store card) to a happier level.

I did notice that when I started carrying the rollover balance, they started increasing my credit line on that card (it's something absurd now, like over $25K) on a regular basis. Dangerous business, that. I chuckle every time they do it-- I will NEVER put that kind of money on credit. But when I applied to open that token store card account, when they called for approval to issue it, the girl nearly dropped the phone when they told her the approved credit line amount-- she asked if I wanted to know my credit score; I said, "Sure!" (Since the number doesn't always appear on credit reports themselves.) I am... ver satisfied with my credit score-- and protect it intensely.

My folks were big "If you can't pay cash, you can't afford it" folks, and my uncle (the "big spender" in the family-- lavish gifts, all on credit) was an object lesson in why it's good to be careful. Their lessons have stuck, and I think my brother and I do pretty well with money. I'm looking into micro-loans based on your recommendations... I've really enjoyed your posts on these topics, thank you so much for sharing your insights!

[sabrinamari.livejournal.com]

These are great stories, and good lessons---one of the things I love about these posts is the insights people share with each other.

I'm enjoying the way that so many, including you, are sharing your orientations to money. there is a stereotype in the pagan community that we are bad with money, and that we don't care about mastering its lessons.

I don't think that's true; I think we are very much like others in the mainstream, subject to the same cultural pressures and conditioning. And some of us got really good training in finances, and a good introduction to Element Money. Thanks you for the glimpse into yours.

My brother and I did not get good training in this, but that's not a barrier to growth. Researchers can learn almost anything, as can academics: if you can read about it, you can learn to work with it.

Классная игруха для телефона! Бомба!

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