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How to set up direct debits using your credit card

Alex Ritchie avatar
Alex Ritchie
- 6 min read
How to set up direct debits using your credit card

Is keeping up with your monthly expenses overwhelming? Are you constantly getting hit with late payment emails and texts from your providers? It may be worth considering automating the process of paying your bills by setting up direct debits on your credit card. 

When you pay direct debit using a credit card, you’re not only ensuring you meet your financial obligations on time, including gym memberships, utility payments and streaming subscriptions, but you’re also keeping your credit score in check. This is because late payments for bills can be reported to credit bureaus and hurt your credit score.

However, before you rush to put all payments on your credit card, you must be aware of the risks involved. You’ll want to ensure you have budgeted appropriately to pay your balance in full each statement period. 

How can I set up direct debit on my credit card?

To set up a direct debit for a payment through your credit card, you’ll typically have to give permission to each provider to automatically debit your card.

Each credit card issuer could have a different procedure for setting up direct debit on your credit card, but you can usually do it by reaching out to your service provider or merchant online or on the telephone and providing them with your credit card details, including your credit card number, expiry date and card verification code. 

If you’re setting up or managing your account online, you’ll see an option of adding your credit card as a preferred payment option. Enter your credit card details and from then on all your payments will be automatically deducted from your account when the next bill is due.

Simple steps to setting up direct debits on a credit card:

  1. Hop online to the provider’s website or app. Search for their billing/payment options and enable credit card payments. You will likely need to enter your credit card details here.
  2. Call up your provider and request to change your payment method to a direct debit via credit card. You will likely need to provide your credit card details to the customer service representative.
  3. Visit the nearest branch or storefront of the provider and request to change your payment method in person. You will likely need to provide your credit card details to the customer service representative.

Before you get started…

Setting up a direct debit from your credit card can be a convenient payment option, however before you do it, ask yourself the following:

Is the service provider you're sending the direct debit to trustworthy? Use your credit card or debit card to set up a direct debit only for those services and providers that you trust.

Are you aware of the steps to cancel the direct debit? Before you set up the direct debit, familiarise yourself with the steps to cancel the direct debit if you don't need it anymore or are planning to close the credit card.

Will you be able to make your credit card payments? Most importantly, make sure that you can pay off your credit card bills comfortably at the end of each month before you set up a direct debit. Any unpaid amount may accrue interest, and you'll end up paying more than the actual bill amount, as well as risk falling into debt.

Check your bank statements regularly

Once you’ve set up your direct debit from your credit card, it is easy to forget about it. However, you need to keep checking your bank statement regularly to make sure that you’re being billed correctly and your payments are being made on time.

It is essential to keep track of all your payments because on closer examination you might find that you’re still being billed for services that you might have discontinued, such as a gym membership, or a streaming subscription.

What are the risks of direct debits from a credit card?

You might be considering direct debit to a credit card as a convenient way to pay your bills on time or to keep your credit scores in check. However, in both cases, you should also be aware of the following risks:

Debt

Most direct debits are typically ongoing expenses, such as utilities bills. Generally speaking, if you’re putting your ongoing expenses on your credit card because you cannot meet them with your regular income, you may want to consider whether this is the best course of action. Some Australians may be better off managing their budgets to meet these expenses with a standard debit card.

This is because using a credit card for direct debits can easily lead to snowballing debt if you’re unable to pay your balance, or even meet minimum repayments, each statement period. By putting your direct debits on to your credit card you run the risk of accruing interest on these payments. Consider speaking with a financial adviser if you’re struggling to pay your ongoing expenses.

Fraud

You’ll want to ensure that the provider you are giving your credit card details to is trustworthy, especially if you are offering these details up via a website or app. This includes double-checking the website is correct and that they offer secure or encrypted payment methods. Use our helpful guide on how to tell if something is a scam if you’re not sure.  

Overdraws

You may also easily slip into overdraw if you max out your credit card. Not only this, but if you’re unable to pay your balance in full each statement period, you will accrue interest on your outstanding balance, plus potentially pay a costly overdraw fee.

How can I cancel a direct debit from a credit card?

You might need to cancel a direct debit if you're closing your credit card or you no longer use the service that you’re paying. In case of a card closer, ensure your bills continue to get paid on time by setting up direct debits from another account.

If you’re cancelling a direct debit because you no longer use the service, you can simply call your service provider and cancel direct debit over the phone, or you can manage your payment through your online account. You could also contact your credit card provider to cancel your direct debit and ask for a written confirmation.

Check your bank statement regularly to ensure that the direct debits have been cancelled.

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Product database updated 16 Jun, 2024

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.