Visa hates this one trick!
October 4, 2020 5:25 PM Subscribe
Is there a credit card that freely allows spending but automatically pays itself off (and requires this auto-payment to function?) Basically, a debit card with the better fraud protection of a credit card. Asking for someone recently out of debt. They do not trust themselves to use a regular credit card and stay on top of payments. They would be willing to pay a fee for this and forgo reward points, since the card could not possibly make money on interest. They don’t want to use a gift card or child’s limited card.
Every credit card I've had has an autopay feature that you can set to the full balance.
posted by ananci at 5:56 PM on October 4, 2020 [13 favorites]
posted by ananci at 5:56 PM on October 4, 2020 [13 favorites]
American Express offers credit cards and charge cards. With credit cards, you can carry a balance and pay interest, but with a charge card, you have to pay the balance in full after the statement comes due. Amex doesn’t require auto-pay, but it’s certainly an option that’s easily set up.
Look at the Amex Green for starters. There’s an annual fee, but some good benefits and rewards as well. It’s their entry-level charge card so it’s not as hard to get.
Amex is accepted in fewer places than Visa and MasterCard, but I use mine almost everywhere (except Costco). Their customer service is top-notch too.
posted by vitout at 6:02 PM on October 4, 2020 [3 favorites]
Look at the Amex Green for starters. There’s an annual fee, but some good benefits and rewards as well. It’s their entry-level charge card so it’s not as hard to get.
Amex is accepted in fewer places than Visa and MasterCard, but I use mine almost everywhere (except Costco). Their customer service is top-notch too.
posted by vitout at 6:02 PM on October 4, 2020 [3 favorites]
(Devil's advocate viewpoint ahead)
If the person does not trust themselves to use a regular credit card in the traditional way, it's possible that the person should not have a regular credit card. Once I got out of debt, I realized that I was not best equipped to handle having a credit card, and the only answer to the question "how can I stay on top of this" that I could think of was "don't get a credit card".
If a person has doubts that they can stay on top of payments, the bigger question is why they need a credit card in the first place. Have the person think about why they need - not want to have, but actually need - a credit card. Is it just because every once in a while, they want to buy something they don't have the cash for? If so, they can put money aside and save until they have what they need. Is it for "in case of emergency"? If that's the case, get the card and put it in a drawer until it's needed.
Debt sucks, as your friend could no doubt tell you. Avoiding the habits that got me in debt was and is the best way to ensure I don't get back into debt. The way your question is phrased made me feel like your friend may be trying to recreate the habits that got them in debt, without the risk of being in debt, and that got my spidey senses tingling.
It's perfectly OK (and possible!) to live in the world and not have a credit card. Maybe your friend could explore what that would look like for them, before diving back into the world of credit.
posted by pdb at 6:11 PM on October 4, 2020 [11 favorites]
If the person does not trust themselves to use a regular credit card in the traditional way, it's possible that the person should not have a regular credit card. Once I got out of debt, I realized that I was not best equipped to handle having a credit card, and the only answer to the question "how can I stay on top of this" that I could think of was "don't get a credit card".
If a person has doubts that they can stay on top of payments, the bigger question is why they need a credit card in the first place. Have the person think about why they need - not want to have, but actually need - a credit card. Is it just because every once in a while, they want to buy something they don't have the cash for? If so, they can put money aside and save until they have what they need. Is it for "in case of emergency"? If that's the case, get the card and put it in a drawer until it's needed.
Debt sucks, as your friend could no doubt tell you. Avoiding the habits that got me in debt was and is the best way to ensure I don't get back into debt. The way your question is phrased made me feel like your friend may be trying to recreate the habits that got them in debt, without the risk of being in debt, and that got my spidey senses tingling.
It's perfectly OK (and possible!) to live in the world and not have a credit card. Maybe your friend could explore what that would look like for them, before diving back into the world of credit.
posted by pdb at 6:11 PM on October 4, 2020 [11 favorites]
I think the tricky thing here is require auto pay for the full balance. You have the option of setting up auto-pay for the full balance with pretty much every card but a card that requires it, I don't know.
posted by any portmanteau in a storm at 6:12 PM on October 4, 2020
posted by any portmanteau in a storm at 6:12 PM on October 4, 2020
There are things like secured credit cards and/or prepaid credit cards which require depositing money before spending it (and thus aren't really "credit" cards), but they're not directly tied to checking accounts like debit cards. However I don't have any experience with either of them.
posted by meowzilla at 7:13 PM on October 4, 2020 [4 favorites]
posted by meowzilla at 7:13 PM on October 4, 2020 [4 favorites]
Most of the answers here are credit cards that have auto payment for the full balance. And most cards have that. But I think you're looking for something closer to every time there is a balance, the balance is automatically paid off, so it's per charge, not per statement. I don't know any like that off-hand, so I would second the suggestion of a prepaid credit card. According to The Balance, a prepaid credit card is when you put money into a special bank account that is used to pay for the purchases on the card as the purchases are made. In that way, it's fairly close to a debit card.
posted by Meldanthral at 8:11 PM on October 4, 2020 [2 favorites]
posted by Meldanthral at 8:11 PM on October 4, 2020 [2 favorites]
I'm going to answer this from the Australian perspective as even if you're from the US I'm pretty sure the same products are offered there.
There's something called a Visa Debit card that I've used for many years. It basically charges everything direct to your savings account (so nothing on credit), but it's like a credit card in that it offers fraud protection, overseas travel insurance, and even bonus points (depending on the provider). Some of them have no annual fees as well, or effectively cancel out the annual fees as long as you perform 20 transactions per month. They were originally targeted at people who can't obtain a credit card, but needed some kind of card to charge online transactions to, so they started out pretty bare bones, but I've noticed they've begun adding all these perks to these cards in recent years. I managed to get a Visa Debit that didn't have international currency transaction fees for international transactions.
Not strictly your question but I'd like to address the "and forgo reward points, since the card could not possibly make money on interest." --- card issuers primarily make money from merchant transaction fees, they skim 2% of the total transaction from the merchant. So if you pay a merchant by card, they get $98 and card issuer gets $2, while if you pay by cash the merchant gets the full $100. That's how they make money, not mainly from interest.
I rather suspect they prefer you NOT to fall behind on payments. The interest rates are high, but that's mainly to cover themselves for the people who fall behind on payments and default. In Australia something like 18.5% of card holders never repay their balance (eventually ending up in default) and given their level of indebtedness is higher than average this could represent as much as 30% of all credit card debt.
posted by xdvesper at 8:39 PM on October 4, 2020 [6 favorites]
There's something called a Visa Debit card that I've used for many years. It basically charges everything direct to your savings account (so nothing on credit), but it's like a credit card in that it offers fraud protection, overseas travel insurance, and even bonus points (depending on the provider). Some of them have no annual fees as well, or effectively cancel out the annual fees as long as you perform 20 transactions per month. They were originally targeted at people who can't obtain a credit card, but needed some kind of card to charge online transactions to, so they started out pretty bare bones, but I've noticed they've begun adding all these perks to these cards in recent years. I managed to get a Visa Debit that didn't have international currency transaction fees for international transactions.
Not strictly your question but I'd like to address the "and forgo reward points, since the card could not possibly make money on interest." --- card issuers primarily make money from merchant transaction fees, they skim 2% of the total transaction from the merchant. So if you pay a merchant by card, they get $98 and card issuer gets $2, while if you pay by cash the merchant gets the full $100. That's how they make money, not mainly from interest.
I rather suspect they prefer you NOT to fall behind on payments. The interest rates are high, but that's mainly to cover themselves for the people who fall behind on payments and default. In Australia something like 18.5% of card holders never repay their balance (eventually ending up in default) and given their level of indebtedness is higher than average this could represent as much as 30% of all credit card debt.
posted by xdvesper at 8:39 PM on October 4, 2020 [6 favorites]
Basically any credit card at this point will let you set up autopay to pay the entire balance due so there's no interest. I don't pay a penny in interest a year, all of my credit cards are set up like that, and have no fees.
Asking for someone recently out of debt. They do not trust themselves to use a regular credit card and stay on top of payments.
Setting up the payment is trivial. But if they're not used to staying out of debt, what steps are they going to take to ensure they don't spend beyond what they can pay off? That's the harder part of the problem.
posted by Candleman at 9:11 PM on October 4, 2020 [2 favorites]
Asking for someone recently out of debt. They do not trust themselves to use a regular credit card and stay on top of payments.
Setting up the payment is trivial. But if they're not used to staying out of debt, what steps are they going to take to ensure they don't spend beyond what they can pay off? That's the harder part of the problem.
posted by Candleman at 9:11 PM on October 4, 2020 [2 favorites]
What about a Pre-paid Credit or Debit card? Then the user can front-load it with cash and not get to the point where they're in debt with it, because it can't go into a negative balance.
posted by essexjan at 8:02 AM on October 5, 2020
posted by essexjan at 8:02 AM on October 5, 2020
Devil's Devil's Advocate...
Sometimes you need a credit card proper. I went without one for far too long and started running into problems doing things like renting a car or checking into a hotel. It will also hopefully help rebuild credit for mundane things like renting an apartment. I had to get around that by just paying six months up front.
posted by zengargoyle at 9:57 AM on October 5, 2020 [2 favorites]
Sometimes you need a credit card proper. I went without one for far too long and started running into problems doing things like renting a car or checking into a hotel. It will also hopefully help rebuild credit for mundane things like renting an apartment. I had to get around that by just paying six months up front.
posted by zengargoyle at 9:57 AM on October 5, 2020 [2 favorites]
I have a pre-paid CC (in Canada) for the sort of reasons zengargoyle laid out and it basically functions in all ways (including the legally required fraud protections) as a regular CC except I can only spend the balance loaded on the card. Said balance accrues no interest but my chequeing account is less than 1% anyways so at the moment not a huge loss and less than my old regular CC charged as a fee. I can move money from my bank accounts online so at worst if I need to make a CC purchase that is more than my current CC balance it just takes a minute on my phone to shift the funds.
This is functionally exactly how I use my Debit card. My Debit card is linked to my low interest chequeing account where I only keep walking around levels of money and when I need to make a significant purchase or series of purchases I move money from my high interest savings account to my chequeing account.
Besides making me a bit of money every year from interest it also isolates the bulk of my bank account assets from frauds like overcharges and card skimmers.
My style of card is also good for people who don't have a bank account as money can be loaded onto it at any retail post office.
PS: While it is true that Visa Inc or MasterCard Inc. don't make money from interest paid (that money is paid to the people one is borrowing from IE: the issuing bank), Visa/MasterCard also don't payout the rewards associated with cards which are wholly controlled by, *drumroll*, the issuing bank. Interest pays for those rewards.
posted by Mitheral at 11:51 AM on October 5, 2020
This is functionally exactly how I use my Debit card. My Debit card is linked to my low interest chequeing account where I only keep walking around levels of money and when I need to make a significant purchase or series of purchases I move money from my high interest savings account to my chequeing account.
Besides making me a bit of money every year from interest it also isolates the bulk of my bank account assets from frauds like overcharges and card skimmers.
My style of card is also good for people who don't have a bank account as money can be loaded onto it at any retail post office.
PS: While it is true that Visa Inc or MasterCard Inc. don't make money from interest paid (that money is paid to the people one is borrowing from IE: the issuing bank), Visa/MasterCard also don't payout the rewards associated with cards which are wholly controlled by, *drumroll*, the issuing bank. Interest pays for those rewards.
posted by Mitheral at 11:51 AM on October 5, 2020
Response by poster: Thanks, good discussion so far. Yes, regular autopay isn’t an option for this person. And they do feel they need a real credit card, or something that looks to every site like a real credit card—otherwise debit would certainly be the way to go! Based on answers so far I’ll most likely recommend they look at prepaid Visa, but if anyone’s seen another good option definitely still interested.
posted by michaelh at 11:56 AM on October 5, 2020
posted by michaelh at 11:56 AM on October 5, 2020
A prepaid Visa is treated as a Debit card from a regulatory perspective in the US. If they need an actual credit card for the chargeback protections, car rentals, and increasing a credit score, this isn't going to do it.
That's different from a "secured" card, which is a credit card that's also linked to a savings account, and the credit limit on the card is usually the same as the balance in the account. There is still a monthly bill, which should be paid from a different account (on auto-pay), but the linked savings account is there to prevent the account from going into default. The linked account is not supposed to be used to pay the bill.
But virtually by definition, a "credit" card is going to allow you to spend money today that you'll have to pay off within a month or so (or pay interest). If that arrangement is going to potentially be a problem for this person, then they probably need to wait a little longer before getting one.
(For credit-building purposes, consider getting a card and either destroying it or freezing it into a solid block of ice. That way, it can't be used -- or can't be used without a couple of hours to think about it, but the existence of it, even idle, is good for your credit score)
posted by toxic at 12:19 PM on October 5, 2020
That's different from a "secured" card, which is a credit card that's also linked to a savings account, and the credit limit on the card is usually the same as the balance in the account. There is still a monthly bill, which should be paid from a different account (on auto-pay), but the linked savings account is there to prevent the account from going into default. The linked account is not supposed to be used to pay the bill.
But virtually by definition, a "credit" card is going to allow you to spend money today that you'll have to pay off within a month or so (or pay interest). If that arrangement is going to potentially be a problem for this person, then they probably need to wait a little longer before getting one.
(For credit-building purposes, consider getting a card and either destroying it or freezing it into a solid block of ice. That way, it can't be used -- or can't be used without a couple of hours to think about it, but the existence of it, even idle, is good for your credit score)
posted by toxic at 12:19 PM on October 5, 2020
Sometimes you need a credit card proper. I went without one for far too long and started running into problems doing things like renting a car or checking into a hotel. It will also hopefully help rebuild credit for mundane things like renting an apartment.
Yup, and a secured card is an option that will allow for this. I had avoided getting a credit card for a long time, and at the point that I realized that not building credit was going to be a big problem, I happened to be unemployed, so credit card companies weren't super excited to give me a real card. A secured card was how I got back on track. Mine was from USAA, but lots of more widely accessible banks and credit card companies offer them too.
posted by naoko at 5:27 PM on October 5, 2020
Yup, and a secured card is an option that will allow for this. I had avoided getting a credit card for a long time, and at the point that I realized that not building credit was going to be a big problem, I happened to be unemployed, so credit card companies weren't super excited to give me a real card. A secured card was how I got back on track. Mine was from USAA, but lots of more widely accessible banks and credit card companies offer them too.
posted by naoko at 5:27 PM on October 5, 2020
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posted by pinochiette at 5:43 PM on October 4, 2020 [11 favorites]