Background A clear policy trend exists towards promoting the use of direct payments (DPs), including those for families with disabled children who use short breaks. However, uptake has been slow and use of DPs has been socially patterned. Recent programmes in England have dramatically increased investment in short break provision including breaks funded through DPs. This research examines the characteristics, circumstances and experiences of families who use DPs to fund short breaks with those who use short breaks funded in other ways. Method The paper draws on surveys totalling 348 parents and carers in families with disabled children using short breaks. We investigate associations between the use of DPs and a range of demographic, socio-economic, well-being, service use and satisfaction indicators. Logistic regression identifies which variables are most strongly associated with use of DPs. We also draw on open-ended survey responses which highlight important aspects of families' experience of using DPs. Results Characteristics significantly associated with increased use of DPs include the presence of main carers who are female, more highly educated and from White British backgrounds, younger children, lower levels of area deprivation, greater access to service and social networks and use of more hours of short breaks. Characteristics not found to be significantly associated with use of DPs include various health and well-being indicators, impairment characteristics of children and service satisfaction. A range of benefits of DPs are described along with problems accessing and using them. Conclusions Direct payments can have a number of benefits for families using short breaks, but access to them is currently problematic and socially patterned. If the uptake of DPs is to be increased and made more equitable, more attention must be paid to promoting and supporting their use in ways which meet the needs of individual families.