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Whenever I get a new credit card, the first thing I do is set up auto-pay.

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It’s a no-brainer — it guarantees I’ll never miss a payment by accident, and the bank just pulls the money straight from my checking account.

But choosing the wrong auto-pay settings (or just accepting the bank’s default) can cost you big time. If you’re not careful, you could end up only paying the minimum due — while the rest of your balance racks up interest.

Here’s how to make sure auto-pay is actually working for you.

Understanding your auto-pay options

When you set up auto-pay, most banks offer a few choices:

• Pay the minimum payment (usually 1% to 3% of your balance)
• Pay the statement balance (everything you owed last billing cycle)
• Pay the current balance (everything you owe up to that time)

If you’re not paying attention, it’s really easy to choose “minimum payment.” But this means over 95% of your statement rolls over to the next month. Next, interest is charged, typically compounding daily, and things get ugly real quick.

Best practices when setting up auto-pay

Here are a few tips for when you set up auto-pay:

1. Choose “pay statement balance” (if possible). This pays off what you owed last cycle, on time, every time. You’ll avoid paying any interest, and you don’t need to pay for today’s new purchases yet.
2. Set up “pay current balance” if you’re a heavy spender. This will pay everything you owe — including recent charges — so you’re fully caught up. As a side benefit, this keeps your credit utilization as low as possible, which helps your credit score.
3. Double-check your bank’s default setting. Before finalizing, make sure you’re not accidentally locked into minimum payments.
4. Set a reminder a few days before due dates. Even with auto-pay, it’s smart to eyeball your checking account balance and make sure you’ve definitely got the funds to cover your payment.

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What happens if you only pay the minimum

Here’s an example of the consequences of only making minimum payments:

My wife and I usually put about $3,500 a month on our credit cards. Let’s say we only paid the minimum — maybe 2% of the balance, or about $70.

The rest of the balance would roll over and start racking up interest. My credit card APR sits at about 22% right now, so this means I’ll pay $63 in interest the first month.

And if we kept rolling that balance over without paying it off? We’d fork over hundreds — even thousands — of dollars in interest over the course of a year (while also racking up a ridiculous balance!)

Smart habits, bigger wins

Setting up auto-pay the right way isn’t just about avoiding late fees.

It’s a key part of building smart credit card habits. Responsible usage keeps you out of debt and puts you in full control of your cash.

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