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Stamp Out Credit Card Late Charges via Direct Debit

5th June 2011

Have you ever incurred charges due to late settlement of your credit card bill? If not, then you're lucky because your credit record is still clean. Otherwise, your credit score would be low thus affecting your capability to obtain credit in the future. And if in case you get approved for a loan, the interest rates that you'd be paying would be higher than those who have never made late payments. When a credit check is made, your history of delinquent payments would be exposed to whoever requested for it - landlords, employers, lenders, mortgage companies, and so on. You haven't realized it but late payments can have a wide and far-reaching effect.

With this in mind, your goal should be to avoid late credit card payments at all costs! But how can you achieve this? Well, you can opt for direct debit as a payment option to be certain that your credit card bill is settled on time.

What is direct debit?

Direct debit is a payment method wherein a person instructs a financial institution to collect a certain amount from his/her account. For instance, you may ask your bank to automatically pay off a specific amount of your credit card dues using the balance from your current account. Usually, it is an on-going instruction that continues throughout a particular period.

How direct debit prevents late payments

Direct debit payments are generally safer versus payment through cash, cheque, and online banking. This is because once you've set it up, the money automatically goes out of your account on the specified date. With cheque payments and over-the-counter payments via cash, there is the risk of your cheque or money getting lost or stolen while you're on the way to the bank or ATM. There are also risks with Internet banking such as falling prey to cyber crimes and your personal information getting into the wrong hands.

Another reason why direct debit can prevent late payments is because your credit card bill is programmed to be settled on time each month. Your credit card company will simply withdraw the funds from your account on or before the due date. Since the withdrawals from your account are automatic, there is no need to remember when to make the payment. If your account balance is insufficient, the bank will then inform you before the due date so that you can make arrangements to deposit money. With cheque payments, there is a three to five-day clearing period so you have to drop your drafts in advance to avoid interest and late charges. As with cash payments and other manual methods, there is a tendency for one to forget about the due date.

In addition, you can easily manage your credit card bill with direct debit. If your credit card is enrolled in a direct debit system, that will be your default payment method. And if you have consolidated all your direct debits to a single account you will only have one account to constantly monitor for sufficiency of balance. The likelihood of deficiency would thus be lower and you can stay one step ahead when it comes to your expenses.

Finally, there are no fees associated with direct debit. The only amount that is taken out of your account is that which will be used to pay off your credit card bill. With other methods, there may be additional handling or processing fees that you have to check come the due date.

Direct debit is used not only for credit card bills but also for other payments that are recurring in nature such as loan amortizations, subscription renewals, utilities and so on. This facility enables users to give on-going instructions to the financial institution and only have to ensure that the source account is sufficiency of funds. They can thus afford to just sit back and relax and forget about credit card due dates. In today's world where everyone is too busy to mind the small tasks, the direct debit facility is perfect for those who just don't have the time to check their credit card statements.