DD or not DD that is the question?

bar_t1

I was just wondering if everyone sets up a direct debit to pay their credit cards or do some folk not bother with DD and use another method?
Also is paying by DD beneficial to ones credit rating at all?
Thanks.

[Deleted User]

Some do and some don't, mostly for good reasons either way.

As long as you are making repayments, it doesn't make any difference to your credit rating.

Martinslovechild

DD is beneficial - for at least the minimum payment - as it means that you won't forget to make a payment and suddenly be hit by late-payment fees on your account.

Some people assume that now that many accounts have Faster Payments to allow money transfers within a few hours, this will suffice. However, the receiving account must accept payments sent via Faster Payments in addition to your current account sending payments via this method. If it doesn't (and not all do) then the payment will take up to 3-4 days.

katejo

bar_t1 wrote: »

I was just wondering if everyone sets up a direct debit to pay their credit cards or do some folk not bother with DD and use another method?
Also is paying by DD beneficial to ones credit rating at all?
Thanks.

I have never used a DD to pay off my credit card. Most of the time I only have 1 in use. The statement comes on the 20th, i get paid on the 27th and I pay the bill immediately so that I can't forget. I doubt it had any effect on your credit rating provided that you pay in time each month.

Gromitt

I have minimum payment DDs for my credit cards but normally always pay them off (minus a few pounds) before the statement date. The few pounds makes sure the DD stays active and makes the bank happy that I have DDs with them.

and If I ever forget to pay off the bill, I know I won't incur late payment fees or screw up my credit history.

InsideInsurance

I always have a minimum DD set up simply in case something happens to me or the statement etc then I know that I will never be hit by late payment charges.

With most cards most the time I make extra payments to clear the balance, but you need to remember how each provider reacts to additional payments whilst on DD to avoid paying more then you ment to or not enough

bar_t1

Thanks for these comments folks.

chattychappy

I never sign DDs for CCs.

My reasons are:
1) If I'm paying interest on a card, then the sooner I pay the better. DDs are inflexible because the money is taken on a specific day. Having money hanging around waiting to be taken costs interest. (Though with some CCs, if you pay early enough then the DD won't be taken.)

2) I lose control of my current account. I don't care what people say about the "direct debit guarantee". I'm abroad often and cannot afford the hassle of having to sort out a DD gone wrong. A while back I had £6800 fraudulently put through on a dormant CC account. If I'd set up a DD for full payment, this could have killed my current account and had other knock-on effects. As it was, not having a DD set up acted as a firebreak.

3) I don't always want to pay from my current account.

4) Manual faster payments are simpler for me - everything done at once. I check the statement and assuming all is OK I send the money there and then. Depending on CC I can see it reflected in seconds. With a debit card payment on the CC's website, I get an immediate email to confirm that payment has been made. Typically the site remembers the debit card details. (Though usually it "clears" onto the account the next day.)

5) People seem to have hassle with DDs. Delays setting them up or finding they stop working if they move their current account or their CC isn't used for a while. Also the interaction with manual payments can be confusing.

6) If you forget about a DD being taken and don't have enough funds in your current account, then you will likely get charges on both your current account and your CC. If you don't have a DD and forget to pay your CC, you will only get charges on your CC.

7) Discipline#1. We get DD'ers here posting months later about how they weren't on the interest rate they thought or that there had been some fraud on the account. There is no reason why you shouldn't check your statements if you use DD, but sadly some people just sit back and relax and assume everything will be OK. Don't sign a DD if this is the reason for doing it!

8) Discipline#2. CCs would love you to sign a DD just for the minimum and before the regs changed, this is all they would offer. If you sign a DD for the minimum, it is so easy to never get around to make that additional manual payment thinking you'll pay a bit extra next month. Manual payment forces you choose how much to pay each month. Even if you then pay just the minimum, at least that's not a decision by default. (Obviously doesn't apply if you pay the full balance by DD.)

9) I don't like the principle.

Despite the above, most people here seem to favour DDs as a way "not to forget" your payment, especially if you are on a promotional deal and risk losing it. I suppose in many situations, my (6) above wouldn't apply because even if you forgot the DD was being taken, you might still have enough in your current account to cover it or your bank would give you an overdraft, the costs of which could be less than losing your promo deal.

As to (7) and (8) it comes down to personality. People with debt problems are often told to "cut up their cards". I don't need to cut up my card to avoid spending on it. Likewise (7) and (8) don't apply to me, but they might apply to others.

bar_t1

Thanks chattychappy. I think i will leave the DD for now and manage the payments manually and see how get on. You touched upon several concerns i had been thinking, mainly, (what if i overlook the current account balance by mistake and have insufficient funds to cover) aswell as (manually having to choose what to pay)

agrinnall

Contrary to chattychappy's view I always use DDs for my CCs (3 at the moment). However, I always pay the full balance, so the card's interest rate is of no interest (pun intended) to me, and I manage my money closely enough that I ensure there is always enough in the payment account when the DD is due. I've been doing this since long before FPS was even considered and never had a problem, but if I was starting now I might well go the manual FPS route.

I just thought I'd add that while chatty's point #2 is a good one I find that with everything available online I can monitor my CCs and accounts while I'm abroad, and this was how I found, while in Vietnam, that one of my CCs had been cloned and used in Australia at a time that I was in the UK, and managed to get the amounts removed before the next DD payment was taken.

chattychappy

agrinnall wrote: »

while in Vietnam, that one of my CCs had been cloned and used in Australia at a time that I was in the UK

Funny that. VN is my second home and I'm there for several weeks/months a year. And it was while I was in VN that the £6800 was taken from my dormant card - one that had never left the UK!