Can I Pay Off a Payday Loan With a Credit Card?

No, you cannot repay a payday loan using a credit card because this is like using one type of loan to pay off another and can lead to revolving debt and put the customer into financial difficulty. 

The most common way to repay a payday loan is automatically through your debit card or debit account – and the lender will usually take these card details during the application process and verify that they are associated with you and can take payments correctly. 

There may be select lenders that might accept payments through a credit card and you can either find this information in their terms and conditions or by asking them directly. However, the payday loan industry is strictly regulated and there are laws in place to protect borrowers from experiencing financial difficulty. 

How Do You Pay Back Payday Loans?

Direct debit (preferred)– The lender will set up the equivalent of a direct debit when your loan is approved and funded. This will allow the lender to collect repayments on a scheduled repayment date using a process known as continuous payment authority.

Cheque – Some lenders allow for payments to be made by sending in a cheque. This is not the preferred method for most payday lenders, but there are many that do accept this. If your loan is heavily in arrears, the lender might take a view that receiving a cheque is better than no payment.

Cash – High street payday lenders will be able to accept cash as payment and you will need to visit the storefront and make a manual payment to the lender. This is not the preferred method of payment since the lender will usually set up a direct debit, known as continuous payment authority. 

Most Payday Loans Are Repaid Using Continuous Payment Authority

Continuous payment authority (CPA) is the standard collection method for payday loans. During the application, the lender will tokenise the customers debit account by placing 1p or 10p into their account and then collecting it back. This process proves that the borrower has a functioning debit account and has funds in their account.

The CPA process allows lenders to be able to dip into the borrower’s bank account and collect repayments on the scheduled dates. The lender will always send payment reminders by email and SMS on the days leading up to each repayment so that it is transparent for the customer and they can prepare by putting funds into their account.

Are There Any Lenders That Accept Credit Cards As Payment?

No, there are no lenders that offer personal loans or payday loans that accept credit cards as a form of payment. This is because lenders do not want to encourage revolving credit and placing debt on top of existing debt.

If you have credit card debt, you may be able to use a balance transfer card to pay off this debt and then use a 0% period for a certain point of time. 

What To Do If You Are Struggling To Repay Your Payday Loan?

If you are struggling to repay your payday loan and cannot pay it off using traditional methods or because there is no money in your account, there are key steps you should take:

Speak to your lender: The best thing you can do in this scenario is to speak directly to your lender. Loan companies are used to having customers fall into arrears and they have processes to deal with this. By avoiding your lender, you are potentially allowing more late charges and daily interest to accrue on top, which will only make your loan more expensive. Plus, it could negatively impact your credit score.

By speaking with your lender and explaining your situation, it may be possible to freeze interest and charges and they might be able to offer you a flexible or more affordable repayment plan.

Make an arrangement: Lenders can often provide what is known as an ‘arrangement to pay.’ This might involve offering the customer smaller repayments that are more spread out, to help them get back on their feet. This process known as ‘arrangement’ will be noted on the customer’s credit score.

Speak to a debt professional: If you are feeling that your debt is becoming a longer term issue, you can speak to a debt professional or charity such as StepChange or Citizen’s Advice Bureau for free and impartial advice. These organisations can give you constructive ways to manage and pay off your debts.

Speak to family: Speaking to relatives and close family members may be able to take off some of the financial burden and they may be willing to help you short term.