Credit Card vs Direct Debit

Continuous Payment Authority (or Continuous card payments) and Direct Debit both enable you to take and manage payments easily but there are some important differences. This guide gives a comparison of both to help you decide which might work best for you.


Direct Debit and Continuous Payment Authority card payments are two of the most common methods used for taking regular payments.

Both enable you to take and manage payments from thousands of customers easily, but you should be aware of some important differences.

CPA and Direct Debit are both automatic payment methods

  • A Continuous Payment Authority (CPA) is an authorisation given by a customer for you to take payments from them by credit or debit card. Payments can vary in frequency and amount. (Other names for CPA include "recurring transactions”,"continuous card payments", ”recurring payments”, “continuous authority transactions” or “guaranteed payments”.)

  • A Direct Debit is an authorisation from a customer that enables you to take payments from their bank account. These payments can also vary in frequency and amount.

CPA is taken via credit cards, whereas Direct Debits are taken directly from your bank account.

  • CPA payments are taken by credit or debit card. Customers must supply you with their 16 digit card number, which is then linked to your bank account by the card networks and settlement banks.

  • Direct Debit payments are taken directly from your customer’s bank account. Customers sign up to the Direct Debit using their bank account number and sort code.


Continous Payment Authority vs Direct Debit

Here’s a comparison of the two payment methods for you:

CPA Direct Debit
Set up Customers sign up using their credit or debit card number by phone, online or in person. Customers complete a Direct Debit Mandate form online, by paper or over the phone using their bank account number and sort code.
Cost per payment High. Typically around 3% + 20p per payment plus a monthly fee for a merchant account. Low. Expect to pay 20 - 40p or 1% per transaction, depending on your provider.
Failure rates High. c. 5% due to credit card expiry and cancellation. Very low. < 1% with GoCardless. This is much better for customer retention.
Flexibility of payments High. You can collect variable amounts or change the amount or date of payments without asking customers for further authorisation High. You can collect variable amounts or change the amount or date of payments without asking customers for further authorisation.
Risk of late payment Low. You can charge customers when the payment is due. Low. You can charge customers when a payment is due.
Admin required Mid. You will need to chase customers to update their details when cards expire or are cancelled. Expect this to happen at least every 3 years per customer. Low. Uses bank details which rarely expire or are cancelled so churn is much lower.
Customer protection Medium. Chargebacks are possible with credit cards. High. Immediate refunds from your bank with no time limit in the event of an incorrect charge.

Should I use CPA or Direct Debit?

CPAs and Direct Debit can both be used for recurring payments, including those which vary in amount and frequency.

CPAs offer many similar benefits to Direct Debit but suffer from higher failure rates due to card expiry and cancellation. This is a bad experience for your customers. It creates unnecessary work for them having to update their details and they may even decide to let their payments lapse to avoid the hassle. By contrast, Direct Debit payments use a customer’s bank details, which rarely expire or change.

Therefore, CPA should only be used for regular payments instead of Direct Debit if you require next-day payments, e.g. if you are delivering physical goods online. Otherwise, due to lower failure rates and lower costs, Direct Debit should be used.

To find out more about using Direct Debit to collect payments, watch our seven minute demo or check out our 60 second Guide to accessing the Direct Debit scheme.

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