Direct Debit Audit Stop wasting your cash

Are you a victim of the growing number of regular payments draining our accounts for things we don't use? It's likely hundreds of millions of pounds are wasted on unneeded direct debits, standing orders and recurring payments.

However, done right, regular payments can save you £100s. This is a full guide to doing a rigorous regular payments audit to cut the cost and the risk, including the unique direct debit wastage calculator.

The three types of regular payments

There are three types of regular payments. The levels of protection you get vary from hugely pro-consumer, to a virtual licence for companies to steal your cash .

1. Standing orders. You set up via your bank
   
   This is an instruction from you to your bank to pay a fixed amount out at regular intervals. It's usually free and you can cancel it whenever you like.

2. Direct debits. You sign a direct debit mandate
   
   This is where you let companies take money for a fixed or variable amount. You've a right to contact your bank to cancel at any time you like, and if there's an error you get a full refund from the bank, rather than the company itself.

3. Recurring payments. You give companies your card details
   
   The key to recurring payments, known as continuous payment authorities until a few years ago, is the company will ask for the long number on the top of your credit or debit card rather than your bank details. If this happens, you need to be aware an entirely different structure of rules come into play.
   
   For a full guide to the risks and how to dispute them read the full Recurring Payments guide.

Do a regular payments makeover

It's possible that all three types could be leaving your coffers each month, quarter or year, and many you may not even know about. The makeover's aim is simple; unearth EVERY regular payment and stop any you no longer need or use.

It may sound like a no-brainer, but discovering long-forgotten payments you've been shelling out for over years is common. It's amazing what many pay for and never use: magazine subscriptions to an old house; insurance policies for long-ditched mobile phones; unused gym memberships, the list goes on and on.

If you're paying for something you don't need, or have forgotten about: STOP!

In fact, one GMTV viewer emailed to say that by doing a regular payments audit, he discovered he was being charged each month for home insurance on a property he'd sold some ten months earlier because the provider hadn't cancelled his policy.

Although he'd already forked out £120 unnecessarily, thankfully he was able to stop further payments and claim back all the money he needn't have paid.

Another of our readers sent us a message to say:

Step 1: Check what you're actually paying for

It's not just about your bank account; it applies to credit cards too.

• Online banking
  
  Most online accounts allow you to click a section which displays all your standing orders and direct debits. If not, there should at least be easy access to a year's worth of statements.

• Branch/phone based accounts
  
  Your account provider should be able to list all the standing orders and direct debits for you. If not, then at the very least request a year's worth of statements.

• Credit / debit card recurring payments
  
  Sadly, these, the worst type of regular payments, are the hardest to detect. They just appear on your statement like other transactions. They're not categorised out. So you're going to need to scour through your statements to find them.

Remember many regular payments are quarterly, bi-annual or yearly so stretch back over 12 months to make sure you cover all outgoings.

Step 2: Do you really need it?

Now evaluate whether each payment is worth it. Scarily, you may find you've got regular payments for companies you haven't heard of. Try a quick Google search to identify them.

Once you know, ask yourself three questions:

If the answer to any of these questions is no, then it's time to take action. If the payment isn’t doing you any good, cancel it, though do ensure you’re not in breach of contract by doing so. To see how much it's really costing you, try the calculator below.

Yet even if the payment is for something worthwhile, that still doesn’t mean there aren’t dangers (see below). Use the calculator, and feedback (or read other's feedback) on what you found and how much you saved: Regular Payments Success

The Good, the Bad and the Ugly

If you don't use something, don't pay for it. Yet even if you do, making a regular payment may not be the best thing for you. Here's my list of the good, the bad and the ugly…

Using regular payments can be a canny way to save yourself money. You can organise your finances more effectively, helping you to budget or even get a discount from many companies if you're willing to pay by direct debit.

• Gas & electricity bills
  
  Paying by fixed monthly direct debit saves you around 10% on energy bills, likely to translate into a saving of £100-plus a year. See the Cheapest Energy Provider plus Cashback article for more.
  
  The discount's given because your suppliers are guaranteed to get paid and the monthly sum is based on your estimated usage. This often leaves you in credit, letting the energy provider earn interest on your cash.
  
  Combat this by giving regular meter readings. If this reveals your direct debit is set too high, you can ask to have it lowered and get your overpayments back (read a full Energy Direct Debits guide).

• Home phone & broadband providers

  The discounts here are smaller, usually just one or two pounds a month. This discount's provided because it's cheaper for your provider to process the bills this way.

  Some believe it's unfair that non-direct debit payers are penalised and a couple of cases are going through court challenging this. When there's any result, this will go in the free weekly e-mail. In the meantime though, as paying this way saves you cash, it's the MoneySaving solution.

• Manage your cash with standing orders

  Standing orders can be a very powerful tool for budgeting, they allow you to set up separate accounts and siphon your cash into them to better control your spending. See the piggybanking section of the full Budgeting guide.

On the flip side, certain products and specific ways of paying for them can turn into a regular payments hell. Always watch out for these, and do everything you can to opt for a cheaper payment option.

• Car & Home Insurance
  
  If you pay for home and car insurance by monthly direct debit (and millions do!), you're being stung. Insurers don't treat you as a good customer who pays on time, instead they see the money as a loan and make you PAY INTEREST on top, often at sky-high 20%+ APRs.

  If possible, pay for these as lump sums to avoid interest. Otherwise, get the Longest 0% Credit Card deal and use that. If you can't get new credit, check the interest the insurance company is charging and compare it to the cost of your standard credit card, then do whichever is cheaper.
  
  Also see the Cheap Car Insurance and Cheap Home Insurance guides.

• Credit card minimum repayments

  These are a hideous invention, designed to keep customers perpetually in debt and paying a fortune. For example, for a £3,000 on a high street credit card at 17.9% interest, it'd take you over 27 YEARS to repay with an interest cost of £3,900.

  It's because the repayment is a set percentage of the debt plus interest. Instead, pay off a fixed amount each month instead, e.g. pay £60/month on the same high street card and you'd clear the debt 20 years more quickly (see the Minimum Repayments guide for more).

  Yet minimum repayments can be a positive tool to guarantee you never miss or are late for credit card repayments. These result in a £12 fine, a hit to your Credit Rating and possibly a loss of 0% deals. If you do only pay the minimum, always ensure you repay more each month by cheque/online/over the phone. Never just pay the minimum.

• When you don't have the money

  Bounce a direct debit and/or go beyond your authorised overdraft limit and you'll be hit with bank charges of up to £35 per go. This site's been at the forefront of the campaign to Reclaim Unlawful Bank Charges, yet it's still always best to avoid them. The automated nature of regular payments makes mistakes common, so always be aware of how much you've got in the bank (see the Budgeting guide) and how much is due to come out.

  Shockingly, in emergencies it may be better to pay the retailer by credit card, so the direct debit isn't taken. After all if you're overdrawn, this is likely to cost just as much interest, if not more than the credit card, and it may avoid you getting fined. See the Best Bank Account and Cheapest Credit Cards guide.

This is a huge WARNING, recurring payments are dangerous. That's the name for any regular payment set up from credit or debit cards rather than bank accounts. They used to be called 'a continuous payment authority' but whatever the name, they're hideous for one large, bold reason:

"You can't cancel them. Only the company you're paying can!"

This means if you want to end a subscription and can't contact it, or fall into dispute with it, there's little that can be done, without huge effort, to stop it.

Avoid, detect and fight these hideous transactions! Read the full Recurring Payments guide.