Direct Debit vs Credit Card – What Should You Pay With?

When should you pay by direct debit and when by credit card? In this article, we will give you an overview of the respective advantages and features.

If you have the choice of making a regular payment by direct debit vs credit card, you will need to weigh the rewards of your credit card against the convenience of a direct debit.

Our goal is to help you decide whether a direct debit or credit card is better for your payments. The following topics will be looked at in detail.

What are the advantages and disadvantages of credit cards?

Credit cards are one of the most popular and famous payment methods in the world. We have written a separate article about the advantages and disadvantages of credit cards. Below is the short version with the most important points as an overview.

Functionality

With a credit card, you can pay almost everywhere, whether in a restaurant, in the store around the corner, or online. You also do not have to pay immediately. The bank gives you a small credit, so to speak. At the end of the month, you get a bill with all your purchases, and then you have to pay back the amount.

The partial payment option (which I don’t recommend) also gives you the option to pay part of the bill and defer the rest to the next month. However, there are high fees involved.

What are credit card advantages?

• Worldwide acceptance: No matter if you are in Berlin, New York, or Tokyo – with a credit card, you can shop everywhere.
• Extras and bonuses: Some credit cards offer attractive additional benefits such as travel insurance or points that you can collect and exchange later.
• Flexibility: You don’t have to pay immediately and often have some leeway until the bill is due.
• “Artificial” installment payment is possible: If you want to buy something that is a bit over your budget, you can pay for it with a credit card and then pay it off in installments via the partial payment option mentioned above.

What are credit card disadvantages?

• Fees: Banks may charge various fees for the cards depending on the offer. Among them, for example, annual fees, cash withdrawal fees, foreign currency fees, and late payment fees. However, this depends entirely on the offer, as there are also cards with no fees.
• Beware of debt: If you don’t pay your bill on time, interest can accrue. And it can be really hefty (often around 13%)!
• Security risk: Credit cards can be lost or stolen. Unfortunately, scammers are looking for credit card data on the Internet. But at this point, please do not panic because there are, of course, many security measures that protect against abuse.

So, a credit card is a practical and flexible means of payment, but it should also be used with caution. If you don’t have a credit card yet, you can take a look at our credit card comparison.

What are the advantages and disadvantages of direct debits?

A direct debit basically gives a company or person permission to debit money directly from your account. It’s actually a pretty simple matter.

How does it work?

Imagine you have a subscription to a magazine or streaming service. Instead of remembering to transfer the bill or pay by credit card every month, you give the company permission to debit the money directly from your account. Every month, the company asks for the subscription fees, and the bank transfers the amount. You see the debit on your account statement afterward.

That’s convenient, of course, because you don’t have to worry about anything.

What are the advantages of a direct debit?

• Convenience: You don’t have to remember to transfer every month. Everything is done automatically.
• No additional fees: With most companies, direct debits don’t cost anything extra. On the contrary, companies usually like direct debits and sometimes even give discounts. The reason for this is that it guarantees timely payment.
• Ideal for regular payments: Especially for things that need to be paid monthly, it’s super convenient.
• Fees are avoided: With direct debits, you automatically always pay on time, which means that fees for reminders are no longer an issue.

What are the disadvantages of a direct debit?

• A covered account is critical: If there is not enough money in your account, the bank may charge fees for the failed direct debit. This can be annoying and expensive! So, the specified account better not be on the back burner.
• Risk of abuse: If someone has your bank details, they could try to debit money without authorization. But don’t worry, in such cases, you can usually get the money back very easily because everything is digitally documented in detail. It also happens extremely rarely. Of course, you should only pay by direct debit at reputable companies.
• Cancellation: If you disagree with a debit, you must take action yourself and reclaim the money.

What is the difference between a direct debit and a credit card payment?

If you have the choice of direct debit vs credit card, there are some points that you should take a close look at. Especially when it comes to fees, there are surprises occasionally.

1. Fees and cost structure

• Direct debit: As a rule, there are no additional fees for the consumer here. But be careful: If your account is not covered, return debit fees may apply. These can vary depending on the bank and the amount.
• Credit Card: Depending on your credit card and the type of payment you make, fees may apply, or reward points may be awarded. This is 100% dependent on your card. For example, if you pay for a subscription abroad using the card, the foreign currency fees will apply. What is the same for all, however, are high interest rates for late payments.

2. Payment initiative

• Direct debit: The special thing about direct debit is that the recipient takes the initiative. You lose a certain amount of control in exchange for convenience.
• Credit card: Here, it works the other way around. When you pay by credit card, you, as the payer, initiate the payment. Here, you decide when and how much is paid. But in return, you also have to remember every time 😉

Acceptance in different countries and stores

• Direct debit: Direct debit is mainly used in Europe. There are countries where direct debit is not known or popular.
• Credit card: Credit cards are standard worldwide! No matter if you are in a small café in Italy or a big shopping center in the USA, with a credit card, you are able to pay practically everywhere.

3. Protection and security for the consumer

• Direct Debit: Direct debits are safe as long as you pay attention to your account information. If there are problems, you can usually get your money back within eight weeks.
• Credit card: Many cards have special fraud protection. If you lose your card, you can have it blocked immediately. With most providers, this can now be done with a click in their app or otherwise by phone call.

When should you use direct debit vs credit card?

In our digital world, there are so many ways to pay that you sometimes don’t even know which method to choose. Direct debits and credit cards are just two of them, but depending on the situation, one or the other method may be a better fit.

When is a direct debit procedure useful?

Direct debits are useful for regular, fixed payments. Direct debit is ideal in the following situations.

• Subscriptions: Have a magazine or a streaming service subscription? A direct debit is your best friend in this case. It’s simple, reliable, and stress-free. It’s also recommended for mobile subscriptions.
• Monthly bills: For things like electricity, water, or rent, direct debit is also handy. You don’t have to remember to pay the bills every month.

When does it make sense to pay by card?

Credit cards are ideal for flexibility and international purchases. It is worth using the card in the following situations.

• When traveling: With a credit card, you have the most globally accepted means of payment in your pocket. But check the foreign currency fee beforehand.
• One-time payments: Unlike direct debit, the credit card is not linked to any permanent authorizations but is suited for one-time payments of all kinds.
• Online shopping: Many online stores, especially international ones, prefer credit cards as a means of payment.
• Emergencies: Sometimes, there are unexpected expenses, or the month is still long, but the bank account is empty already. Here, the credit card can serve as a financial buffer. But be careful: Always remember to pay back the money as soon as possible to avoid the debt trap!

Both payment methods have their strengths. While direct debit is great for regular payments, the credit card offers flexibility and is especially practical abroad. It’s best to keep both options in mind and decide depending on the situation.

My recommendation is to collect the rewards for large amounts and save yourself the hassle for small amounts.

Is it good to pay for your credit card by direct debit?

Yes, it’s a smart idea to pay your credit card by direct debit!

By setting up a direct debit for your credit card bills, you make sure to never forget to pay it off. As we know, credit cards like to put an inhuman interest rate on partial payments, so a direct debit for your credit card can actually save you quite a bit of money.

Moreover, timely payments contribute positively to your creditworthiness. On the other hand, paying late consistently will hurt it.

If you’re confident in maintaining a consistent bank balance and want the convenience of automatic payments, it’s a great option. However, if your income is irregular or you prefer to have more control over when and how much you pay, manual payments might be better for you.

Which payment method is safer?

When it comes to money, security plays a big role. Whether shopping online, at the supermarket, or on vacation, we all want our money to be safe. So here are a few tips and hints on how to stay safe when using a direct debit or credit card.

Protect your personal data

• Keep it secret: Never share your PIN or TAN with others, even on the phone or in emails. Real banks never ask for this data!
• Be careful when shopping online: Only buy from trustworthy stores. A small lock symbol at the top left of the browser’s address bar indicates that the site uses encryption software to protect your data. It’s right next to the link. Here:

Which payment method is the safest? – The one where you are careful with your data.

Secure online shopping

• Update your computer: Always keep your operating system, browser, and virus protection up to date. That way, hackers have fewer chances.
• Use secure networks: When shopping online, use secure networks, preferably your home Wi-Fi. Public networks, such as in cafés, can be risky.
• Trust your gut feeling: If an offer sounds too good to be true, or the online store looks strange somehow, better leave it alone.
• Small test: Many fraudulent websites consist of only a few pages. For example, scammers may create only a home page and a page where people enter data. To see how many pages a website has, there is a short test:

Google the link of the homepage and add: “site:” in front of it. This is how it should look:

You will then see how many pages an online store has. In my experience, it’s usually clear whether it’s a real store pretty quickly. For example, I have never seen a real store that only has 5 pages.

What to do in case of fraud or loss?

• React immediately: If you notice that something is wrong or your card is gone, contact your bank immediately. Many banks have special hotlines for such cases.
• Reclaim direct debit: In the case of unauthorized or unjustified debits through direct debit, you can reclaim the money. Simply talk to your bank.
• Block credit card: If your credit card is lost or stolen, have it blocked immediately via app or call. That way, no one can shop at your expense.

Is direct debit safer than a card?

With a little caution and a few simple rules, you can pay absolutely safely with both direct debit and credit cards.

Every payment method has risks, but with a direct debit or credit card, you can control quite a bit yourself. With trusted stores, both are among the safest payment methods. Always listen to your gut feelings! In case of uncertainty, it’s better to check with the bank once too often than once too little! Safety first!

What are my experiences with direct debit and credit cards?

Personally, I use direct debits wherever possible. Sure, the credit card rewards are great, but it’s not worth it to me to pay all the bills separately every month.

I think what you should also consider is that with just a single reminder fee, in most cases, all the credit card benefits are wiped out again. So, if you are not always extremely disciplined in paying all bills immediately, you will probably come out cheaper with a direct debit in the end.

Where I myself have not set up a direct debit procedure, unlike the others in the Kredite Schweiz team, is for my cell phone bill. The reason is that I always like to keep track here. More than once, I have discovered charges that were unjustified and about which no one else would have informed me. With a direct debit, I would certainly have missed it.

Of course, in order to avoid this problem, one would simply have to look through the direct debit statements, but skepticism has prevailed with me on this point. Perhaps I should change my mobile subscription provider 😉

What is the conclusion?

The choice of direct debit vs credit card depends on the type of payment.

📜Conclusion on direct debits

Direct debit is particularly suitable for regular and fixed payments. Be it for subscriptions, monthly bills, or recurring services, automated payment saves time and effort.

In addition, there are usually no additional fees for the consumer. However, a funded account is essential to avoid fees, and the risk of misuse, though rare, remains.

💳Conclusion on credit cards

Credit cards score particularly well for their flexibility and worldwide acceptance. For one-time purchases, online shopping, and especially travel abroad, it offers unparalleled practicality.

Advantages such as rewards and additional services (e.g., insurance) can also speak for a credit card. But caution is advised: Fees may apply depending on the card, and debt is a potential risk.

For regular payments, especially within Europe, direct debit is often the easier and less expensive option. For international transactions, the need for flexibility, or a desire for additional bonuses and services, the advantages of a credit card outweigh the disadvantages.

In my experience, it pays to go with the credit card for large amounts (assuming you can skim the rewards) and set up a direct debit for small amounts for simplicity’s sake.

Direct debit vs credit card: What suits your situation better?