It is possible to pay bills with a direct debit funded by a credit card, which makes it possible to earn rewards points while conveniently managing regular expenses.
Check how your credit card stacks up. Compare credit cards with Finty.
In this guide
Key takeaways
- Using a direct debit streamlines bill payments, but check if your bank classifies them as eligible for rewards.
- Some providers may classify bill payments differently, potentially affecting points accrual.
- Alternative options include BPAY, third party processors, and buy now pay later services linked with a credit card.
How it works
When your goal is to earn as many rewards points as possible, you'll not want to lose out on credit card reward points for bill payments just because paying with a credit card is not an option.
- Find an eligible bill. Not every bill can be paid via direct debit. Common options include utilities, subscriptions, and memberships.
- Gather details. You'll need the credit card number, expiry date, and CVV. Also, ensure you have the details of the biller, like their reference number or your customer ID.
- Configure the payment. Choose your credit card as the payment method, decide on a payment date and how regular it should be processed.
- Review and confirm. Double-check all details and confirm once you're sure they're correct. You will probably receive a confirmation email or letter after.
What to watch for
There are a few things you need to keep in mind if you want to earn more points.
- Pay with a card with a high earn rate. The difference between 0.5 points per dollar and 1 point per dollar adds up when you are making regular and substantial bill payments.
- Beware of how payments are classified. Your bank may treat a payment as a cash advance, resulting in a charge instead of earning points.
- Some transactions will not earn points depending on the credit card you use. For example, paying taxes to the Australian Tax Office (ATO) and cash advances are examples of payments that might not earn points, or earn at a lower rate.
- Avoid unnecessary bank fees. Although BPAY is free, there may be restrictions on how many such free payments your bank allows each month.
Pros and cons
Pros
- Avoid late payment fees for forgetting to pay on time. Both BPAY and direct debits ensure timely payments.
- Stress free and convenient if you can ensure there’s enough money in your account to meet any bills to be paid.
- Save time and avoid the hassle of sorting through email and bills. BPAY View lets you receive your bills directly.
- Get alerts on payments due where BPAY View is offered by your bank and the biller. May vary with banks.
- Easy to keep track of bill payments and find them at tax time. They are all in your online banking statement.
Cons
- Make sure you have enough funds or credit. Once you give direct debit authority to a biller or set up a standing order there must be enough funds or credit to meet that expense.
- Dishonour charges. With a direct debit, insufficient funds will lead to dishonour charges that the biller will pass on to you.
- Over limit fees on credit cards when direct debit is on a credit card and there is insufficient credit.
- BPAY transaction limits. Billers may limit the value for BPAY payments, for example from credit card accounts.
- Limits by financial institutions. Your bank may limit how much you can pay from an account, on a single day or to a specific business.
Direct debit vs standing order
Direct debit payments and standing orders operate differently.
Differences
Direct debit
Standing order
To whom you give authority
A direct debit permission is given to a company to whom you must pay bills.
A standing order is an instruction given to your bank.
Who takes action
The biller to whom you have given authority.
Your bank.
How it works
You give a billing company permission to take money from your account on an agreed date in the form of a direct debit.
A standing order tells your bank to pay an exact amount to someone on a recurring basis.
If there are changes to amount
The biller informs you before they change the amount on the direct debit, requiring your authority.
The biller informs you and you change the standing order value instruction given to the bank.
Who charges you
Fees depend on both the biller and the bank.
The bank charges you for setting up and maintaining standing orders. Varies by bank.
Direct debit vs BPAY
Direct debits are allowed by all banks. Your billers have to set it up with banks themselves, once you ask them to. BPAY, a widely used bill payment service in Australia is a quick and convenient way to pay bills via online banking. You can use BPAY for one-off payments or recurring payments from savings and transaction accounts.
More than 60,000 Australian businesses display a BPAY biller code and Customer Reference Number (CRN) on their bills. You can use it for paying your telephone, internet, water, gas, electricity, rates, household rent or strata, credit cards and insurance premiums.
Here’s how BPAY differs from direct debits.
Differences
Direct debit
BPAY
How to establish it
Set up directly with a merchant or company.
Choose BPAY through online banking.
Type of payment
Funds debited directly from your debit or credit card.
Transfer from your savings or transaction account. Many BPAY companies also let you pay with debit or credit cards.
Payment frequency
Payment is automatic once you set it up.
You can use BPAY for one off or ongoing basis for up to 18 months.
Fees
Fees vary based on the biller as well as on the bank.
Free, but your bank may have a limit on how many free transactions are allowed per month from your account.
Time to transfer
Usually, direct debits take a day to process. It may take a few days before the transaction appears on your bank account statement.
Transfers usually take place on the same day when you pay on a banking business day and before the cut-off time.
Alternative ways to pay bills
You can also earn reward points by using Citi PayAll, BPAY for business, B2Bpay, American Express AccessLine, FrequentPay and PayPal, among other payment platforms.
Consumer and business
- BPAY. This is the main alternative for businesses and consumers, regardless of who they bank with or have taken credit cards from.
- PayPal’s Pay with Rewards. Can be used for eligible purchases at online stores accepting PayPal and for recurring payments. You can find out whether your credit card rewards are eligible for Pay with Rewards by contacting your card issuer or visiting the PayPal website.
- Citibank PayAll. Offers Citi credit card customers a new way to earn reward points on payments made to Australian bank accounts. It has been designed for those instances in which payees do not accept credit card payments. Thanks to PayAll, now you can earn points on rent payments, for example. PayAll can be used for one-off payments or recurring transactions. You can earn 1 point per $1 for cards in the Citi Rewards program. You can earn and 0.5 points per $1 with credit cards linked with Qantas Frequent Flyer or Emirates Skywards.
- Buy now pay later services. Since you can fund these accounts with a credit card, this gives you another option for earning points when you can't pay a bill directly with a credit card.
Business only
- American Express AccessLine. If you have an American Express credit card — either business or corporate — you can use AccessLine to pay virtually any business, including those who do not accept credit cards, and earn reward points on all eligible bills.
- B2Bpay. Businesses can use B2Bpay’s secure online portal to pay their bills with a credit card, even when their billers do not accept credit cards. B2Bpay process payments via BPAY or electronic fund transfer (EFT), charging you a small handling fee. You may use all major credit cards and not have to forego earning points when using this service.
Verdict
As you can see, there are very many ways for you to earn credit card rewards points than the most obvious.
Is it worth it? Add up all the payments you are currently making and not earning points on (most likely rent, paying suppliers, taxes, etc.). It doesn't take long to earn enough points to redeem for a business class flight that would otherwise cost thousands of dollars.
FAQs
Can all bills be paid via direct debit with a credit card?
No, some bills cannot be paid with a direct debit. You can use an alternative payment method funded with a credit card to earn rewards if a direct debit is not possible.
Are there fees associated with using a credit card for direct debits?
A payment processing fee or credit card surcharge may be charged. If you are unsure, check with the biller before setting up the direct debit.
Will I earn rewards points for every direct debit transaction on my credit card?
Certain types of transaction, like cash advances or balance transfers, are not eligible to earn rewards. Check how your bank classifies direct debits to see if it is eligible to earn rewards points. If it is not, you can use an alternative method such as a third party processor.
What happens to the direct debit if my credit card expires or is lost?
If your card details change due to expiration or loss, you'll need to update each direct debit you've set up that draws from your old credit card. Failing to do so might result in missed payments.
