How To Manage Direct Debits On Your Credit Card

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Find out what a direct debit is, and that you can set one up on your credit card account. Understand the pros and cons of credit card direct debits, and how to cancel them.

Direct debits are amounts that you authorise to be taken from your bank or credit card account on a regular basis to pay for a service or goods. This might include your telephone bill or a gym membership. The amount may be fixed or variable, as with a telephone bill, and it may be deducted on exactly the same day every month, around the same day, or on a weekly or fortnightly basis. In other words, direct debits can be set up to exactly suit your requirements and the demands of the merchant or service you are paying.

Credit card direct debits pros and cons:

The advantage of putting direct debits on your credit card is that you know they will be paid each month on time. You will also be able to take advantage of your credit card’s interest-free days, and you should feel assured that your credit limit is sufficient to always cover the amount. Direct debits on a bank account without an overdraft facility can lead to problems if you have not planned your finances properly that month and your account is short.

The disadvantage of direct debits on a credit card is similar to the last point about bank accounts: you must make sure that your credit limit can accommodate the direct debit each month, which will involve you paying close attention to your other credit card spending so you don’t overdo it. Direct debits that are refused for any reason can trigger a dishonour fee on your account. Direct debits make it harder to query problem bills, because the money has already been taken.

Cancelling direct debits:

It is entirely your choice to cancel a direct debit and you do not have to explain why you are doing so. All you need to do is send a letter to the merchant concerned, and copy in your credit card or bank. However, bear in mind that cancelling a direct debit may not end your liability to the merchant if an amount is outstanding or you have entered into a contract that still has some time left to run. You must be especially careful when a contract states that payment must be made by direct debit, and you have signed your agreement to this. If you are in dispute with a merchant, then you may have no choice but to cancel your direct debit to prevent any further damage being done to your account.

Once you have cancelled your direct debit, make sure you receive a confirmation from your credit card provider. You could also try calling your credit card provider a few days later to check that the direct debit is indeed showing as cancelled.

• Comparison of Top 10 Credit Card Offers

Editor's Choice: Our Top Credit Cards

Credit Card	Card Details	Interest Rate (p.a.)	Cash Advance Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Interest free days (up to)
HSBC Credit Card	Editor's Choice: 0% for 6 months Balance Transfer & No Annual Fee Featuring a $0 annual fee for life, and 0% p.a. balance transfer for 6 months, the HSBC Credit Card was voted the Best Transactor Credit Card for 2010.	16.99%	20.75%	0% for 6 months	$0	55
Suncorp Clear Options Standard Visa Card	A great 12 month balance transfer offer, combined with a low annual fee and a good interest rate on purchases.	12.24%	17.99%	1.9% for 12 months	$39	0