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How to cancel a direct debit

How to cancel a direct debit
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Grab a strong cuppa and dare to peek at your bank statements. You may be surprised at the amount of cash dribbling away every month in regular payments for this and that. Get rid of unnecessary financial commitments by learning how to cancel a direct debit.

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When cancelling direct debits is a good move

When spending is unnecessary

Has that Amazon Prime free trial become almost £100 a year? Does the budgie that died two years ago still need a health plan? It makes sense to do a regular check on monthly, quarterly and yearly spending. Then get rid of anything that’s no longer needed, wanted or affordable.

When facing financial difficulties

In extreme financial hardship or debt, knowing how to cancel a direct debit quickly will ensure you have some money for food that month.

When it’s not the best way to pay

Direct debit payments are so convenient – for the companies receiving your money. If a different method of payment suits your income and budgeting pattern, switch to that.

When it’s cheaper not to

Paying for something in one go is often cheaper than spreading the cost with monthly payments. This is usually the case with car insurance.

Reasons not to cancel a direct debit

You have a contract 

Many services require you to sign up for a set period of time. If you stop paying too soon, there may be a cancellation fee.

Late payment fees

Choosing to deal with monthly credit card bills by direct debit is a good way to avoid late payment fees. It’s still possible to top up with an extra amount when viable.

Insurance companies may charge a huge default fee for any missed payments.

You will improve your credit rating

Paying bills on time, through direct debits, can protect your credit rating. Direct debits ensure that you don’t miss any payments by mistake. This is especially important with credit cards and store cards.

Don’t miss out on a refund 

Knowing how to cancel a direct debit at the correct time can save you money, especially when switching energy providers, for example. Some accounts can close in credit and companies will pay refunds directly into your bank.

How to stop a direct debit

  • Sign up for online banking and cancel direct debits with a click. Otherwise, talk to your bank in person or on the phone, keeping the payment details to hand. Alternatively, use a snail mail template, found here.
  • Check carefully that there will be no late fees, cancellation fees, or default payments.
  • Cancel the direct debit at least one day in advance of a due payment to avoid it being taken as usual.
  • Inform the company you have been paying in writing or by email. The bank will let them know anyway that the direct debit has been cancelled.
  • Make alternative arrangements to pay, if required.
  • Budget for the money you have rescued, or put it in a savings account.

All banks have specific information on their websites about how to cancel a direct debit from their accounts.

Managing payments from your bank account

If you have a regular income but the bills are tipping you into the red every month, you might benefit from an arranged overdraft. Otherwise, the bank could charge a higher fee for any unpaid direct debits. 

When arranging a new direct debit, choose the payment date carefully to suit your income pattern.

Make a note of quarterly and yearly subscriptions, and save up in advance so that you can pay in a single payment rather than relying on direct debits. 

Check that no further payments are taken after the cancellation. If something goes wrong, complain.

Consider using a separate bank account for monthly bills, and pay in enough to cover them. That way, the council tax money isn’t spent on pizza. 

Keeping track in future

Help is available to monitor direct debits and other monthly payments. Try a budgeting app to stay ahead of the game, such as:

An app-based current account, such as Monzo, combines banking with budgeting and tracking features. 

Conventional banks also offer online features and alerts to help customers keep on top of direct debit payments. 

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