I do this often actually. Many of my bills (not utilities) are paid using micro payments automated via my online bill pay. I also get my bank to e-mail me a balance of my bank account daily so that I know where my account is in addition to having my own copy. This helped me catch a fraud charge on my bank card the next day, since I knew I hadn't made any big payments that week.

Keep in mind I dont go crazy like posting a payment every day, but I do make a payment once a week. Maybe for some people it would be easier to make a payment every paycheck? I see that being easier than being semi-completely broke one pay cycle psychologically.

@TravelingMan: If you do electronic payments it costs the company almost nothing but computer cpu cycles to process those.

Lazarus

Agreed -- I know Citibank, American Express and Target Visa only allow a finite number of payments per month (at least in my experience). I wonder what credit card lender this guy in the blog entry had that allowed him to make payments every day?

voyage2k

This is a cool idea, but keep in mind that those multiple tiny payments might not go toward the monthly payment they expect. In other words, they might not bump your due-date forward. So you'd want to make these micro-payments in addition to the regular monthly payment.

elsifer

I am doing something similar although not with such small payments. If I am about to buy something, like a magazine say, thats £3-4. I think "I can find whatever info is in that mag online". That stops me buying it and then I use that money at the end of the month to make an extra payment off my debts.

Baby steps :)

pixelkid

I can't see this as an option. I would think that most companies would have a limit on payments per month because of the cost of posting each individual payment.

TravelingMan

When I try to make more than 4 payments to my Citibank Credit card it locks me out until the next billing statement.

Scalvo2

Lazarus- Don't know if I can agree because even my bank allows a finite # of free transaction a month. Which tells me there is a cost involved.
But for me it really doesn't matter I know what I make- I know what I spend (charge) and have no difficulty paying once per month.

TravelingMan

I think the credit card companies only limit your payments through their online bill pay options, using another service you can probably send as many as you want.

dmang88

I call shenanigans. Citibank caps it at one payment every 5 days.

Oh No I Di'n't.

@Scalvo2: that's just like my ex wife....debt and ex wives=bitches

normanm4

@TravelingMan: Well, we werent talking about free transactions. We were talking about cost for processing those payments. My bank charges me $5.95 a month for online payments for up to a certain amount and a small fee for each additional payment over that free bucket. It doesn't really cost them more to process those additional payments, but it wont stop them from making a few extra bucks from people like me.

Lazarus

My bank will allow me to send as many payments per week/month/year as I wish - they don't care.

Other institutions often limit the number of payments you can make on your account online to a per-day or per-week or per-month limit - sometimes due to the way their system handles incoming funds, and others because they are trying to force you to automated payment systems (think Phone) that they can charge you a "convenience fee" on...

DigitalNoise

I do not do micro payments, but I do do multiple payments throughout the month so that I can make sure I don't screw myself out of too much cash too quickly. It does help because it lowers your average daily balance.

MikeSims

I pay my credit card bill once a week instead of once a month so that I'm more conscious of what I'm spending. Seems to work well enough.

lmath

It is known that a good technique is to pay with at least 2 payments of what you are willing (or able) to pay for that pay period. This is because it affects the capitalized interest, This works because people normally pay close to their due dates, and instead of sending 200 at once, you could send 100 halfway down your pay period and 100 just before the due date. This affects your daily balance, and may help reduce your debt a little bit. Of course if you pay your dues at the very beginning of the pay period, then it helps even more.

Mau

It might do you better good to open an interest-yielding savings account at your bank for this purpose. Call it the "get out of debt" fund, and transfer your 5 bucks from your checking account into your high-yield savings account every week! Since the savings account is at your bank, you shouldn't have a problem transferring the funds, and then when you've built up a good chunk, you can use the savings account to pay down your credit card debt. Even better, you've now made a little bit of money against the money you would have just tossed at the debt immediately - you can even use the interest to pay down more debt. :D

Granted, you won't get ahead on this; I don't know any high-yield savings account with an interest rate even approximate to most credit cards, but it's still more than you probably would have paid just bill-paying straight from your checking account!

phoenix

Lazarus- I think here we are going to have to agree to disagree. Otherwise we can go back and forth all night.

TravelingMan

FYI: The limitation for multiple payment on most cards is if you use their click-to-pay service. If you use your bank's online billpay you can usually circumvent the limitations.

fivecentnickel.com

Comment on Tackle Your Debt with Micropayments It is known that a good technique is to pay with at least 2 payments of what you are willing (or able) to pay for that pay period. This is because it affects the capitalized interest, This works because people normally pay close to their due dates, and instead of sending 200 at once, you could send 100 halfway down your pay period and 100 just before the due date. This affects your daily balance, and may help reduce your debt a little bit. Of course if you pay your dues at the very beginning of the pay period, then it helps even more.

RobertNootrac

I don't remember seeing any limit at ING's bill pay. Personally I do it weekly. I have a nice spreadsheet that adds up the week's income, calculates how much to put into savings for taxes, and subtracts fixed expenses from income. Then I know what I really have left, which usually goes to the credit card.

davebarboza

@ Travling Man v Lazerus:

Lazerus is 100% correct on this debate. (The debate did devolve into talk of Online Bill Pay with your bank, which is entirley different from paying your credit card through their site.) I can speak from professional experience, when a user makes a payment through their credit card website their is nearly NO cost assoicated with that transaction to the bank issuing that card. No human interaction is needed, nor do the banks charge each other for these transactions (as it is a cyclical relationship)

There are two exceptions to the no cost payment posting: When a payment is made with insufficent funds. When the payment has to be posted that day (instead of being placed in an electronic queue a person processes that transaction (thus the fee for "rush payment").

I can't speak for every financial instution (only my employer) however, I believe most follow standard practices.

informationcenter

I do the same thing but instead of payments (no debt here) I do micro saving/investing. Sending small chunks of daily change to either my brokerage accounts or savings accounts.

Yared

informationcenter- LOL

TravelingMan

The lump sum is painful. The small regular payments are easy and its like a game. Great Idea.

Astos Green lasers rulz

Astos

@TravelMan - Glad I could provide some laughs. Not to get into a big debate here, but your argument is founded on the fact that some institutions charge for that feature so there must be some kind of cost assoicated with it. Thats what you've stated anyway. Applying that logic to other services illustrates your ignornace on the subject. Do you think text messages on your phone really cost your carrier 10 cents? Just because you are charged X for something says little about the actual cost assoicated with that product. Welcome to a free market.

Banks are FOR PROFIT business. Every single one of my Credit Cards allows me to pay my bills online for free. We all know banks will give you fees for anything you can imagine. Why do most offer this free??? Essientially your argument is suggesting that companies like Providian, Capital One, Wells Fargo, HSBC, Chase, and Dell Financial(lenders I use) are willing to take a loss for the customers conveinience by offering me and MILLIONS of other clients free online bill pay. Even if these tranactions only cost them 1 cent, we are talking about millions of dollars loss yearly. Banks aren't in the business of losing money. Talk about LOL.

Now by comparison some of those companies do charge if I call and speak to a human to make a payment.

Heres the difference: One is processed ENTIRLEY by computer (unless there is a problem or rush). Whereas another is processed by a human who makes an hourly wage.

I will grant you this; there is some cost associated with these transactions: data centers, servers, automation, bandwidth. However spread accross trillions of transactions a year we are talking in the realm of 1/1000 of a cent. (I did pull that number out of the air and have no empirical evidence to substaniate it)

informationcenter

How bizarre - why would they limit how many payments you make? It makes no sense to me. It could give you grounds to take legal action against them - because if they won't let you pay it's not fair for them to charge you any interest

andylogaz

We didn't make micro payments when getting rid of our mortgage, but we did rounding. We'd look at our balance and write out a check for the payment plus enough that the balance dropped to a multiple of 250. For instance, when we owed $8757, we'd add enough to our payment (of $300)so the balance would be $8250. Some months we could afford less than others, but we always sent in extra. We paid down 30,000 in about 18 months that way.

karlawithak

Not a bad idea, but make sure you've got a higher interest rate on the debt than what you could earn in your savings account throughout the 30-day billing cycle. Probably not an issue if you're paying down a credit card, but consider a zero- or- low interest rate loan.

OX4

Buncha you people need to GET A BETTER BANK! Shop around, people!

There are banks that will give you free checking account, no fee for using checks or using atm, and no fee for bill pay. Why the heck would you NOT use THAT bank?

While you're at it, some people apparently do not know that you do not have to buy the $20 book of checks from the bank. You can order a whole BOX of checkbooks online for about $8.

You're welcome.

mrs_helm

Bank of America lets you do a transfer from your BoA checking account to your BoA credit card. Then it posts the next morning (assuming you do it before a certain time of day). I feel better paying it down when I can see the numbers update quicker. I personally don't like waiting 3-4 days for the balance to update... drives me insane.

bdsakx

I don't have a tremendous debt, but about $2k on my Discover card. I do something similar with it. I don't due micropayments, but I do several payments throughout the month. Usually one payment is from 'my money' then the others are from supplemental income I've earned during the month.

Here's another trick I figured out. When the bill arrives, I immediately pay the minimum amount due (but don't really count it as my payment). In the past, I've missed the due date by a couple days, and while this doesn't affect my credit report, the banks like to charge late fees. So to avoid being late on a payment and having to talk them in to crediting the fees, the minimum amount due is paid immediately, then I pay a couple big chunks through the month.

heavylee-again

I hate paying bills, especially large ones. Because I get paid twice a month, I split the biggest ones in half, round up and add a few Hamiltons for good measure, and schedule them to be paid via my banks free bill pay (a TOTAL godsend!)

This gets them paid off early and is less of a strain on my finances.

eightseventeen

My credit union gives me free online bill paying with my free checking (interest bearing if my balance exceeds a certain $ amount), and the bill paying service is even free when they mail a physical check.

And they gave me a free candy jar when I signed up.

MikeT

@MikeT: Id totally sign up for that if I got the candy jar.

Lazarus

I call B.S.; it's a nice anecdote though. I am also a Citibank credit customer, and I get cut off at four payments like the people above mentioned. Maybe the author recalled the wrong credit company, but I doubt that anyone would accept ~30x $5 payments in a month! (and I quote: "he was sending Citibank an extra $5 each and every day via online billpay")

Best advice for this guy's buddy NCN, is to ditch the credit cards if he has difficulty finding the money to pay them...

dasinmd

Comment on Tackle Your Debt with Micropayments My parents have used credit cards their entire lives, but have never had a balance. Their budget is tied directly to their checkbook. Every purchase on the card has its reciept put in an folder on her desk. Every evening a check for the totals for the day is put in an envelope. Every month, she sends the stack of checks to the credit card company. They always know how much money they have, since its tracked in the check book balance, yet still get the ease of use and cash-back bonuses from credit cards.

PaulaAnchises

informationcenter at 09:52 PM on 05/06/08 Reply
My goodness You certainly are full of yourself. Or full of something at least.
LOL

TravelingMan

@dasinmd: I'll say it again... The 4 payments/month limitation is typically imposed by the creditor on their click-to-pay service. Pay through online billpay from your bank and you shouldn't have any problems (unless things have changed very recently). Even still, making extra weekly payments has a similar effect.

fivecentnickel.com

I can see this working well and poorly psychologically. I like the idea of having a little more spending cash in my bank account for gas, groceries, diapers, baby formula, etc. The "micro payment" gives you a little more freedom. However looking looking at my credit card balance after making numerous payments and only seeing a slight difference would be discouraging.

For me (and everyone is different) I prefer to budget accordingly. I use Excel as I am an Excel junkie. I would rather make a large payment once a month and see that big jump down on the balance.

For me dropping the balance precipidously in one lump payment is more gratifying.

However even better is not being in debt at all.

informationcenter

I find it very interesting that debt is still a problem. Besides student loans, I don't have any debt (not even a mortgage, since I sold my house). This is mostly because I was raised in a family overcome by debt from the day I was born, and I always thought people of my generation (I'm 27) were familiar with debt from childhood. I'm really glad I learned from my parents' mistakes!

Michael

@Michael: If only we were all as smart and wise as you.

SabrinaFaire

Word to the wise: your bank's online system will allow you to make unlimited transfers from checking to savings, but will limit you to six online transactions from savings back to checking per statement. Oddly, you can make as many transfers from savings to checking at the ATM -- the limit is on transfers made via phone or online. Before you call shenanigans, Google "limit ACH transfers".

Of course, the best thing to do once you get your credit cards paid off is to rip them up and never go into debt again! Ever! (Okay, maybe for a house, but only if you can put 20% down and have the monthly payment be no more than 1/4 of your take-home pay).

If you have to use credit cards because you can't afford to pay cash, then you can't afford it! Save up money for expensive things, a little bit at a time. Instead of screwing around with these $5 micropayments, find an envelope, label it with what you want to eventually get, put $5 in there every day/two days/week/whatever, and save up until you can buy it outright.

tbfromny

I started with this mehtod to reduce my credit card debt. Combined with doing a balance transfer to another credit card of 0% interest, I elimated my debt in 8 months. I've also been living debt free for 3 years now continuing to do this "micro-payment".

Maybe it helps that I get paid per week. On my payday each week I would send electronically a payment. This helped me cause it kept me in line with my weekend spending and also stopped me from purchasing on impulse. (And I was using Amex and Discover so I know for a fact they allow an electronic payment each week). So instead of having to shell out a large sum of money each month that I may or may not have, this helped me budget each week what I do have.

Now that my debt is done, I still use my credit for purchases, but on my payday I see what I purchased for the past 7 days and send in a payment each week to pay it off.

link01

Comment on Tackle Your Debt with Micropayments I try and make payments on a weekly basis. That way, my account is never too high making me think I have more money than I actually do and then getting hammered once the end of the month and drastically changing my account balance. It is purely psychological, but I think it helps. This way, I am always keeping my account fairly level and slowly increasing (it helps that I get a paycheck every Friday too though!) rather than letting it build up high and then giving it all away at once :( ....keeps me sane at least!

VaniaAgrius

"mrs_helm" mentioned getting a better bank. Does anyone use a "web only" bank? I've seen these advertised and I'm curious about them. No ATM fees, no monthly fees, etc.

There are a lot of them out there, but how do you make deposits (check or cash) if they don't have a store front?

Anybody recommend one over the other, and why?

rwilliams3

how about you fuckups dont get into debt?

haxxed