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March 25, 2009


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No, I'm under 40 and I agree with you. Admittedly, it's not an obvious call between the risk of forgetting to pay the bill on time one month (which is easy to do considering the way the companies deliberately move due dates around) and the risk of a cc company making a mistake and cleaning out your checking account, but the harm done in the latter scenario is much greater (yes, you'll probably get the money back. Eventually. After you've bounced every single draft on your account that went through before the company's screwup became evident).

To my mind, a significant part of the point of running expenses through a credit card rather than a direct debit of any kind is to impose a third party between my checking account and the rapacious outside world. If you then let the credit card pull directly from your checking account, then you've diminished that benefit.

>2. Points? Did he say points?

(If you've read the whole book this is explained) He uses a travel card (I forget which one, but it gets him points per dollar spent AND points per mile traveled, so if he buys an airline ticket for $300 that's a 10,000 mile trip, he gets 300 points for the $300 spent plus a point per mile, or something similar) because he's a frequent flier - as always Ramit encourages you to do the math to determine whether or not this type of card is better for you than a straight 1% or 2% cash back.

I use auto-deductions as much as possible. To lower risk, I create a separate sub-account for each vendor (credit card, student loan, etc.) and route the month's payment to that account on my bank's web portal (it takes just a second to transfer the money to a sub-account). Once it's paid, that sub-account is at zero balance until the next month when I route again. I only link that sub-account's info to the vendor's site so it doesn't have access to my main checking account. The vendor doesn't know that it's a sub-account, since each has its own separate account number.

For those unfamiliar, this may sound like a hassle, ("How can I remember to move money around every month?") but in practice, it's really not. I do all my bill routing after I deposit my paycheck (2x a month), so I don't have to worry about paying bills on time since I know the money's there to be withdrawn. I don't even need to remember my bill due dates, since I've already set them up to happen a few days after the 15th and last day of the month. It's surprisingly easy and secure enough for me.

I think using credit cards for the pure convenience of it is enough for me. Not having to carry wads of cash and coin that I could easily lose or misplace is a huge benefit in my opinion. I also do not completely automate the bill paying process. All of my cards are due right at or shortly after the first of the month. So I sit and down and pay them all at once. This also forces me to sit down and view my online statements to ensure all the charges are correct.

The only thing I use auto-deduction for is my mortgage and that is only because the transaction occurs within the same banking intranet.

I do, however, have some of my bills set up to automatically charge my credit card each month or quarterly (trash service)but I NEVER set anything up with direct access to my daily checking account.

Using a credit card for every purchase possible provides convenience but it also creates a barrier to my checking account that a Debit card can not provide.

I am glad you clarified the "INDIAN" quote... Being an Indian doesn't necessarily justify the use of that statement but it certainly buffers any flack that he may receive from other Indians that take offense to his quotes.

diddo for using the credit card for "everything", I gain points (FirstCommand Platinum VISA is my choice)and the bank is the SAME bank/investment house I do biz with. On the due date of the cc, my checking account is auto deducted for the FULL balance shown on the monthly statement. I get the grace period to check the bill as needed, and log into checkbook. I have virtually ALL my utilities, insurance, etc,. billed to my credit card for convenience. Only "one" monthly bill to pay (so to speak) that way - the credit card! I get my pension, interest, disability payments deposited to my money market savings all around the first of the month, so I wait till after mid month to move money from savings to checking - after the cc bill comes in along with the other bill statements. These bills are "paid" via the credit card on/about the 30th~ and a $500.00 cushion is left in checking. It works very well! But, I'm a (multi) millionaire next door so it stands to reason...:)

Tracking and categorizing expenses can be very convenient through one credit card statement. Keeping tabs on your credit expenses weekly through your banks website will help you manage your budget. As always you don't want to spend beyond your means and keep making those regular repayments.

I wouldn't peg it as an over-40 thing, I'm 26 and have never and probably will never allow auto-deductions from my checking account. I just don't trust people/companies to get it right every time.

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