3 Different types of direct debit

rehanmalik3030

We all agree having a direct debit in place is a good thing. But what are the advantages and disadvantages of the the 3 different types offered by leading credit card companies.

Full amount, Fixed and Minimum.

I want to know what are the advantages and disadvantages of all 3.

Thanks in advance.

sambuca9

I would say that fixed would be the most problematic as there is always the risk that it will not cover the minimum payment which could result in charges.

Most people would say full balance is the best as avoids any interest.

Minimum safeguards against missing a payment which would again cause extra charges, you can always make extra payments as well to reduce the balance quicker.

YorkshireBoy

sambuca9 wrote: »

I would say that fixed would be the most problematic as there is always the risk that it will not cover the minimum payment which could result in charges.

Unlikely. Most (all?) providers offering fixed amount DDs state that they'll collect the minimum payment if this is more than the fixed amount set up.

Advantages of fixed amount DDs:

1. Debt reduces quicker (provided you're not still spending on the card).
2. Gets rid of the "I'm struggling with my debt" minimum payment marker on your CRA reports.

grumbler

rehanmalik3030 wrote: »

....

I want to know what are the advantages and disadvantages of all 3.

...

Is the advantage of the full payment not obvious? The interest on purchases is waived only if the balance is paid in full.

Minimum payments are are:

• for long-term 0% offers,
• for people in financial distress,
• for people that prefer making big payments manually,
• for idiots (Why they're dangerous )

vlad

YorkshireBoy wrote: »

Unlikely. Most (all?) providers offering fixed amount DDs state that they'll collect the minimum payment if this is more than the fixed amount set up.

Advantages of fixed amount DDs:

1. Debt reduces quicker (provided you're not still spending on the card).
2. Gets rid of the "I'm struggling with my debt" minimum payment marker on your CRA reports.

The only CC i pay by DD is with the Hellifax, I pay the minimum each month, from time to time they write explaining that this will take longer and cost more, and from time to time they write offering me deals on balance transfers from other cards.

rehanmalik3030

YorkshireBoy wrote: »

Advantages of fixed amount DDs:

1. Debt reduces quicker (provided you're not still spending on the card).
2. Gets rid of the "I'm struggling with my debt" minimum payment marker on your CRA reports.

But supposing for example you have a fixed direct of say £50 and you for whatever reason decide to pay the minimum for any given particular month say £10 then will you not have the hassle of:

1. cancelling the the fixed direct debit or suspending it and
2. re setting up the direct debit
3. problems with timing of the cancellation in relation to when the the direct debit is claimed by the credit card company and when the funds are released by the bank

rehanmalik3030

grumbler wrote: »

Is the advantage of the full payment not obvious? The interest on purchases is waived only if the balance is paid in full.

Minimum payments are are:

• for long-term 0% offers,
• for people in financial distress,
• for people that prefer making big payments manually,
• for idiots (Why they're dangerous )

I agree full payment direct debit is best but not everyone can afford to have this in place.

So which is most flexible between the fixed or minimum?

grumbler

rehanmalik3030 wrote: »

I agree full payment direct debit is best but not everyone can afford to have this in place.

If so, they possibly can't afford to spend on a CC. Most of CCs are a very expensive way of borrowing; only payday loans and some overdrafts are more expensive.

So which is most flexible between the fixed or minimum?

Do you see any flexibility in the minimum payment? I don't see any.

rehanmalik3030

grumbler wrote: »

Do you see any flexibility in the minimum payment? I don't see any.

For a standard credit card (no 0% offers) having a minimum payment direct debit to take care of the minimum and avoid late payment charges should they forget to make this and then having the ability to make extra manual payments on top when you can afford to is this not the most flexible way for persons on a tight budget with no savings???

grumbler

It is, but this is not what you asked.

m4rc

Why not have the minimum taken by DD so you don't miss a payment date and then make additional payments at any point. That gives you flexibility and a safety net.

In fact I'm not sure you can get more flexible than that, the only other alternative is no DE, and that's dangerous.