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Can you set up a direct debit from a credit card?

author: Sarah Beresford

By Sarah Beresford

We looked at how you can use your credit card to make regular payments.

Can you pay bills with a credit card?

You could potentially pay some of your bills with a credit card, but you’d need to make sure you make all your payments on time to minimize interest fees. Bills that are a good idea to pay with a credit card include:

  • council tax
  • broadband
  • utilities. 

Paying some of your bills with a credit card can be advantageous if you’re collecting reward points or using a credit improvement card to build your credit record. However, you’ll lose the advantage if you don’t pay off your credit card in full every month. If you don’t pay it off, you’ll be spending more due to interest, increase your credit utilisation rate and potentially damaging your score. Some companies may also charge a fee if you pay with a credit card as well.

If you’re not sure you can manage your payments properly, setting up a direct debit straight from your bank account is your best bet. You won’t incur interest or miss any payments this way. You could set up a direct debit to pay your bills, or pay your credit card

What is a Continuous Payment Authority?

Although you can set up direct debits to come out of your bank or building society account, you can’t set up direct debits from a credit card. Instead, you can set up a Continuous Payment Authority (CPA). While a CPA is similar to a direct debit, there are some key differences to bear in mind.

If you want to set up regular payments from your credit card, you can arrange a continuous payment authority (CPA), also known as a recurring payment. When you do this, you’re giving a company authorisation to take money from your card.

An example of a CPA would be when you sign up for a free 30-day trial and enter your credit card details. Unless you cancel it before the trial ends, your card will be regularly debited by the company, depending on the agreement. Amazon Prime is an example of a CPA.

How is this different to a direct debit?

Some of the main differences between CPAs and direct debits are:

  • control - direct debits give you more control over your money. With a direct debit, only you can make amendments to it. A company can change a CPA whenever, without you realising.
  • protection – CPAs don’t have the same protection that direct debits do. If a payment’s taken from your credit card in error or fraudulently, you’d have to contact the company and rely on them returning the payment.
  • cancellation - terminating a direct debit is as easy as contacting your bank or via your online through your banking app. To cancel a CPA, you'd need to contact the company you signed up with.

CPAs can also get charged against an expired card, so letting your credit card expire doesn't mean you won't still be responsible for the payment. If you want to cancel the agreement, you should always contact the company.

Other ways to make recurring payments from your credit card

If you still want to make regular payments from your credit card but don’t want to sign up for a CPA, then you can do it manually.  To make payments on time,  set reminders on your phone or mark them in a calendar.

Credit cards can be a useful tool if you use them wisely. They can help you save interest on large purchases. For example, if you buy a car or a holiday, you could transfer the cost to a 0% interest card. Make sure to pay the balance off before the interest rate goes up though, and check for any balance transfer fees as well. Paying off your card each month will help you build up a good financial history for lenders to see when they search your credit file. This can boost your chances of being accepted for credit.

If you find yourself using your credit card to regularly delay payments or for impulse purchases, then you could be at risk of increasing debt.

Find out where you can go if you need help with debt or read about how long you should wait between credit card applications.

Disclaimer: All information and links are correct at the time of publishing.

author: Sarah Beresford

By Sarah Beresford

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