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Should I Automate or Manually Pay My Debt Off? (This will Surprise You)

How can I pay off my credit cards faster? You could be unknowingly derailing your debt repayment plan by automating your payments.

white desktop with pink notepad and calculator, money in clip with text overlay "a sneaky way creditors keep you in debt longer"

Do you find yourself wondering, “How can I pay my credit cards off faster?” It's a great question, and I've got a secret trick to doing so.

Giving a second thought to whether or not to automate or manually pay your monthly credit card and student loan debts may be about a hair's breadth above getting the dust bunnies out of your work keyboard.

It just doesn't seem that important.

But depending on which one you choose, you could be lengthening your Debt Freedom Date significantly.

Why is that?

Let's take a look at why you would and would not want to do each of these options.

Why You Would Want to Automate

Automation is awesome. Let's face it − to set it up once and not have to ever worry again about paying a bill (other than that you keep earning income to cover it) is priceless.

Another big reason why you'd want to automate your debt payments is consistency.  Consistency is KEY in debt payoff.

Especially if you want to avoid dings on your credit report just because so-and-so forgot to press “submit” on the payment last June.

Another reason for consistency? Some student loan lenders will give you a discount on your interest rate after a number of consecutive, consistent payments.

For example, while paying off my Sallie Mae Loans, I got my interest rate lowered by an incredible 1% automatically after making 36 consecutive, consistent payments. That was awesome!

Now let's look at why you wouldn't want to automate your debt repayments:

  • You're Set Up For Longer Debt Repayment: The minimum payment will go down as you pay off your debt over the years. This is because your minimum payment is calculated as a percentage of the principal. So you will unknowingly take longer to pay off your debt if you only ever pay the minimum automatically (sneaky little trick, eh?).
  • More Paperwork to Slip through the Cracks: If you change bank accounts, then you would have to remember to re-set up your automation, or risk defaulting on a payment (ask me how I know that one?).
  • Minimum Payment Trap: You are more likely to just make the minimum payment, even if you can afford to make more than the minimum, because you set-it-and-forget-it with this method.
  • It Disconnects You from the Emotions: Automation takes the emotions out of personal finance. This can work IN your favor when saving money but can work AGAINST you when paying off debt. That's because you don't see how much that debt is really costing you, and you may be more apt to rack up some more moving forward.

Why You Would Want to Pay Manually

Manual payments put you in the driver's seat, which can be both a good or a bad thing (probably how most mothers of sixteen-year-olds feel).

If we assume you're great with manual shifting, then there are some real benefits to manually making your monthly debt repayments.

For one, since you're going to your creditor's website each month and manually making a payment, it's much easier (and more likely) to pop on a few extra dollars that you have sitting in your checking account. Saved $25 by not going out one Friday night? Tack it on to your minimum. The results are immediate and cascading.

Another great thing about making manual payments? You really feel your debt. Maybe that's not something that makes you happy, but it is something that will make you think twice about racking up more debt in the future.

Now let's look at why you wouldn't want to manually make your debt repayments:

  • Forgotten Payments: It's pretty easy to forget a payment when you have to make it each month (especially in our paperless-statements society).
  • Miss Out on a Discount: Lenders know that it is more likely they'll be paid back + interest if someone sets up automated payments. So some of them will throw you a 0.25% discount bone for doing so. You could miss out on this if you manually make your payments.
  • Takes Up More of Your Time: You will also spend more time and energy by having to go in and make the payment each month (though this should be minimal).

See why you might want to take a second look at whether or not you want to make manual or automatic debt repayments when thinking about how to manage your money? There's really no right answer here, there's only the right answer for you.

Financial gurus might balk at that, specifically if you're able to take advantage of a discount in some way for setting up automation.

But if you're a forgetful person, one late payment with tacked-on penalties and a ding on your credit report far outweighs any gains from that discount. On the other hand, you might be a very conscientious person who easily will remember (and will actually do) to send in extra payments as you have them, plus adjust your automatic payment as your minimum naturally decreases.

It's really just all about who you are and what works for you.

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Amanda L Grossman

Personal Finance Writer and CEO at Frugal Confessions, LLC
Amanda L. Grossman is a writer and Certified Financial Education Instructor, Plutus Foundation Grant Recipient, and founder of Frugal Confessions. Over the last 13 years, her money work has helped people with how to save money and how to manage money. She's been featured in the Wall Street Journal, Kiplinger, Washington Post, U.S. News & World Report, Business Insider, LifeHacker, Real Simple Magazine, Woman's World, Woman's Day, ABC 13 Houston, Keybank, and more. Read more here or on LinkedIn.


Friday 1st of July 2016

I automate the mortgage, but pay the credit cards manually. For bills that stays about the same every month, it's easy to automate. I like to keep a handle on my credit card usage so it's better to make a payment myself.

Amanda L Grossman

Sunday 3rd of July 2016

Thanks for sharing your strategy, Joe!

Money Beagle

Monday 27th of June 2016

I think automation is the way to go provided you have a check in place to make sure that the payments are correct. For example, we have a spot on our spreadsheet for every payment that we expect to make during the month. If it doesn't get filled in, that means that something needs to be checked, or if it's filled in and another payment processes, that'd be a problem too!


Tuesday 28th of June 2016

Hi Money Beagle! Who is in charge of filling in the worksheet?