Image source: Getty Images
Whenever I get a new credit card, the first thing I do is set up auto-pay.
Looking for a secure place to grow your savings? See our expert picks for the best FDIC-insured high-yield savings accounts available today – enjoy peace of mind with competitive rates.
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:
- 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.
- 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.
- Double-check your bank’s default setting. Before finalizing, make sure you’re not accidentally locked into minimum payments.
- 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.
Got a big balance you can’t seem to knock out? Check out our picks for the best 0% intro APR balance transfer cards — some cards offer nearly two years of interest-free breathing room to finally eliminate your debt.
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.
Looking to upgrade your wallet? Explore our top-rated credit cards to make sure you’re getting the most from your money.
Alert: highest cash back card we’ve seen now has 0% intro APR into 2026
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
