One thing to look for when you compare credit cards is the payment methods allowed and how they are applied. Most issuers will accept payments by cheque, postal order or bank check. Some will accept direct debit payments set up in advance when you apply for a credit card, or after you have taken receipt of it. Some issuers may even offer a reduction in interest rate or waive the monthly handling fee if you choose to make your payments by direct debit. But is it really to your advantage to pay your credit cards by direct debit?
Paying your credit card balance by direct debit can save you money in more than one way, but it does require you to be certain that the amount to be paid will be in your current or savings account on the draw date. Here are some of the ways that paying your credit card balance by direct debit can save you money.
- Avoid late fees and penalties.
UK credit card companies collect over £300m per year in late fees alone. When you choose to pay your account by direct debit, you won't ever have to worry about being late with a payment again. As long as you have the required amount in your current or savings account, it's on the credit card issuer to get it on time. This saves you more than just the one-off late fee. Most credit card issuers will rescind special rates and offers and raise your interest rate if you have a single late payment. - Get lower interest rates.
Some credit card issuers will lower your interest rate by .5-1% if you choose to pay by direct debit because it costs them less to collect your account and there is less chance of your defaulting on your payment. When you apply for a credit card, read through the details carefully to see if you qualify for lower interest rates with a direct debit. - Avoid interest charges.
If you arrange a direct debit to pay off your entire balance each month in the early part of the billing cycle, you may entirely avoid paying interest charges. Compare credit cards online to find the best credit card for your needs.
