Can you direct debit from a credit card?
Just like you can set up Autopay from a bank account for your monthly bills, you can also use a credit card. A direct debit from a credit card (instead of a bank account) could earn you rewards points and help manage your cashflow.
A direct debit credit card Autopay can avoid potential charges that could occur if a bank account has insufficient funds – either because other payments were taken out or you’re waiting to get paid and didn’t check your balance. By setting up direct debits from your credit card, and always maintaining available balance, you won’t incur fees from missed payment fees or insufficient funds.
But there’s an important caveat: You must pay your credit card balance off in full when the bill is due, otherwise you risk paying more for those bills and accruing debt.
» MORE: How do credit cards work?
Direct debit from a credit card vs. a bank account
The difference is simple: You can either set the provider’s bill payment to direct debit from your credit card or bank account.
Direct debit credit card pros and cons
- Earn rewards points, depending on your credit card.
- Bills get paid on time, as long as you maintain an available credit balance.
- Free up your regular account and savings. Pay all your bills ‘at once’ with the lump sum credit card repayment.
- The bills could cost you more if you don’t pay off the credit card in full within the provider’s interest-free period.
- Pay for services you otherwise would’ve cancelled.
- Potential debt risk.
Direct debit bank account pros and cons
- You’re paying from your money, not accruing debt.
- Save on possible credit card processing fees.
- Potential missed payments with providers and insufficient funds/overdraft fees from your bank if you don’t check balance before autopayments.
- Less cashflow flexibility.
» MORE: Guide for credit card payments
How credit card direct debit payments work
It’s up to individual providers to direct debit from their credit card for bill payments. Some companies might not accept credit cards, so it’s best to go to each provider for clarification about their rules and regulations.
Look on your most recent bill for payment options, check their website or call customer service. If you’re with Telstra, for example, you can set up a credit card payment via the MyTelstra app or over the phone.
If the provider allows credit card direct debit autopayments, there’s no harm in trialling it for a couple of months. It’s simple enough to update your payment method.
Types of payments for credit card direct debits
The best bills to set up as direct debit credit card payments are your fixed expenses related to your personal and home life.
Common fixed payments include:
- Phone bill
- Netflix, Spotify, Apple Music etc.
- Car payments
- Health insurance.
Your variable expenses are better to handle manually because they can be harder to forecast. This could include expenses such as electricity costs, petrol and food.
Another reason to choose manual payments is if the bill is high – close to your available credit or your limit. You might not be able to use your credit card if you exceed the limit, which might lead to missed payment from multiple providers.
How to set up, change or cancel a direct debit on a credit card
- Make a list of your recurring monthly bills.
- Research each provider’s payment policies, online or on the phone.
- Follow the prompts to set up your credit card direct debit as the payment option.
- Cross-check with your bank to make sure there are no issues for each auto payment. Discuss the opportunities to earn rewards points through your expenses. It could be worth changing to a rewards credit card.
- To change or cancel the automatic credit card direct debit, log into your customer dashboard and navigate to payments.
Here’s one example of the process with a specific provider, Medibank.
- Log into the My Medibank app.
- Tap ‘Me’ at the bottom.
- Select ‘Manage Payments.’
- Select ‘Set Up a Direct Debit.’
- Click ‘New Credit Card.’
- Enter payment details.
- Set frequency and date.
- Click Confirm.
Is it a good idea to use a credit card to direct debit your bills?
Whether or not this financial set up could work for you depends how you currently use a credit card. If you accrue points and pay it in full at the end of the month – enjoying the benefits of the card without paying interest – this is a strategy worth considering.
If you’re struggling to pay your bills, however, and want to use your credit card to help ease the pressure, it might not be the best approach – simply because you’d be using debt, not your money, to pay your bills.
If you’d like to trial automatic bill payments, your two alternative options are to:
- Use a debit card.
- Calculate your total monthly fixed bills and put money into an account dedicated for bills with each pay cycle. This can even be an auto payment (percentage or fixed amount) from your everyday account to your bills account. Set up your auto payments with external providers from this bank account.
Frequently asked questions about how direct debit credit card payments work
There are pros and cons to both. For direct debit credit card auto payments, you could earn rewards points and have the peace of mind of knowing your bills are paid on time (so long as you maintain available credit). But if you don’t repay the credit card in full, you might pay interest on that charge.
For auto payments via bank accounts, you can save on credit card fees and pay the bills from your money (and not accrue debt), but you need to pay attention to what’s in your account. Missed payments with the providers and insufficient funds fees with your bank could occur.
If you have to pay the bill regardless, you might as well earn points on each purchase if you can. However, whether you can earn rewards on credit card direct debit payments will depend on the credit card, as not all cards come with a points program.