Millions of credit card users across the UK have been issued a crucial warning that a simple administrative error could lead to substantial interest rate increases on their balances.
The Direct Debit Danger
Personal finance expert James Does Finance, who shares advice with thousands on TikTok, has highlighted a critical pitfall in how people manage their credit card repayments. He emphasised that while setting up a direct debit is generally the safest way to ensure timely payments, the timing of its setup is absolutely vital.
"Avoid this one crucial mistake when it comes to paying off your credit card," James warned his followers. He explained that most UK cardholders understand they need to pay their statement balance each month, but the process of ensuring payment isn't always straightforward.
Why Timing Is Everything
The financial danger arises when cardholders set up their direct debit too close to the payment due date. James detailed a common scenario: "Say it comes to three days before the payment due date on your credit card, and you owe £1,000. You need to pay this £1,000 by that due date."
"However, if you were to set up your direct debit maybe three days before, then what you could find is actually the direct debit isn't live until five days after you've set it up because it takes the credit card company a while to process this."
This creates a dangerous gap where the payment deadline passes before the direct debit becomes active, resulting in a missed payment.
The Costly Consequences
The outcome of this timing error can be financially devastating. James stressed: "What actually happens is your statement balance doesn't clear because the direct debit hasn't been finalised until after the payment date."
He added the stark warning: "And then what you'll find is you'll actually then owe the credit card company interest, which can be massive. You know, some credit cards can be sort of 80% interest."
This means a simple administrative oversight could transform a manageable £1,000 balance into a debt rapidly accumulating interest at potentially extortionate rates.
The expert's final advice was clear: "It's really important that, if you go down the option of setting up a direct debit with your credit card, that you really make sure that it is in place well before the payment date." Cardholders are urged to set up direct debits immediately upon receiving their card or statement, allowing ample processing time to avoid these punitive charges.
