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Direct Debit Danger

Beware cash leaking from your bank account

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Updated May 2017

Your bank account needs you!It's a shocking example: "I've paid £16/mth for white goods we no longer have for 6 YEARS." Many waste £1,000s a year paying for things they don't need or never use. So whether it's mags, gyms, dating sites or paid TV, get tough and cut 'em down.

Join the Cancellation Heroes: have your own rigorous super-audit to banish these bank balance bandits for good.

Join the Cancellation Heroes

Cancellation Day superheroMany of us have costly subscriptions on gyms, mags, dating sites, packaged bank accounts and more, yet rarely or never use them – or with time and house moves, forget about 'em altogether. It's likely hundreds of millions are wasted this way.

Here's a painful example from Martin's Radio 2 phone-in with Jeremy Vine:

I looked through my standing orders for the first time in ages. I've been paying repair insurance for two white goods we no longer have for six years, at £16 a month.

Over six years, that's £1,200 down the pan – think what you could do with that! So whether it's the weekly mag you pay for but rarely read, or the unused gym membership you're guiltily hoarding, take action now...

Being a Cancellation Hero is simple: unearth EVERY wasted regular payment and stop any you no longer need or use.

Flush 'em out and you'll soon have more cash in your pocket (no cape or tights required). All you need are your bank and credit card statements and a little know-how.

Tales of cash flushed down the drain

It's amazing what many pay for and never use. Discovering long-forgotten payments is common. Examples have been rolling in via Twitter, email, and the Cancellation Success forum:

Moved 2 years ago, but was still paying a direct debit to my old gym (£330 per year ) and to what was my local wildlife centre (£43 per year) – both of which are now too far to visit (and I never went to the gym anyway!). Also cancelled a phone insurance plan for £10 a month, as the phone is now so old it isn't worth the insurance Total saving for this year over £500!

Trawling through my bank statement, I had been paying for mobile phone insurance I wasn't using since 2009!!

Cancelled the direct debit and was informed the refund for £856 would be with me within 7 days! Kerching!

Just claimed back £650 in incorrectly charged (I switched and they kept taking) electricity... Sad thing is I didn't do it sooner.

I had appliance cover... when I read this article and checked the policy I realised most of my appliances would not be covered. I have now cancelled £22 per month. Thank you MSE – you have saved me money again!

I used to pay £102 a month for a family gym membership for 1 year, and I only went about 5 times.

Give your regular payments the once-over

If you're paying for something you don't need, or have forgotten about, STOP! There are three types of regular payment, and it's possible all three could be leaving your coffers each month, quarter or year, and many you may not even know about. Use these steps to weed 'em out:

Step 1: Do a direct debit and standing order audit

To start your audit, you need to know what you're looking for. The first two to tackle are standing orders and direct debits. A standing order's an instruction from you to your bank to pay a fixed amount out at regular intervals. superhero It's usually free, and you can cancel it when you want.

Direct debits are set up when you sign a direct debit mandate to let companies take a fixed or variable amount of cash. You've a right to contact your bank to cancel these any time you like. If there's an error you get a full refund from the bank, rather than the company itself.

How to audit 'em

Turn detective and use your statements to hunt them out. It's not just about your bank account; it applies to credit cards too:

  • Online banking. Most online accounts have 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 or 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.

Many regular payments are quarterly, bi-annual or yearly so stretch back 12 months to ensure you cover all outgoings.

Step 2: Tackle hidden recurring payments

These are the third type of regular payments. They're a little more complicated because you can't cancel them on your own – but you can tell your card provider to do so.

The key to recurring payments 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 – an entirely different structure of rules comes into play. See the full Recurring Payments guide.

How to audit 'em

They can be tough to spot. You may've set one up for mags, telecoms or websites (including adult websites) without realising. It's also known as a 'continuous payment authority'. Effectively it's a permission to regularly take payment when needed, so it just looks like anything else on your statement.

Scarily, you may find you've got recurring payments for companies you haven't heard of. Try a quick Google search to identify them, or contact your bank or card provider. They could be:unfit superhero

  • Unused gym memberships
  • Unused subscription TV channels
  • Unread magazine subscriptions
  • Old dating site memberships
  • Unused packaged bank accounts
  • Unused club memberships (eg, golf)
  • Insurance for items you no longer have
  • Unwanted charity direct debits

Some MoneySavers who regularly check their bank accounts have reported finding direct debits and/or continuous card payments they didn't realise they'd set up. If it's happened to you, it may be related to a free trial followed by a monthly subscription after making an online purchase.

A few years ago, only the company taking the recurring payments could cancel them, but rules have changed, and you can now tell your card provider that you want to cancel.

If you find a recurring payment and you no longer want/get the product/service, it's best to contact the company taking the payment first and ask them to cancel it. If they refuse, contact your bank or card provider and tell them to cancel it.

If you've not been receiving any goods or services in return for your payment (this isn't paying for a gym or golf club, but just not bothering to go) then you may be able to get some payments back. Ask the company taking the recurring payment first. If they refuse to refund, you can try the chargeback process with your card provider.

Alternatively, new service Smartbill, finds, tracks and cancels your unwanted subscriptions for you. Once you sign up Smartbill either cancels any unwanted subscriptions for you, or works with you to help you cancel them yourself.

Or you could try Bean*, which scans your accounts to find recurring costs - from overpriced bills to unused gym membership. It helps you find and switch to places where you could be spending less and helps you cancel any unwanted payments.

If you sign up through this link*, you'll receive a £5 Amazon voucher 30 days after you complete all its sign-up stages - including attaching your bank account or credit card.     

Don't know what something on your statement means?

It can sometimes seem like bank statements are written in a foreign language. So, while you might easily recognise your weekly shop at Tesco or your monthly direct debit for Sky TV, would you know what REV or TFR means?

If you've checked your account and don't recognise something, see if we've got it in our new glossary guide of bank statement codes and abbreviations.

Oh, and REV and TFR? That's bank speak for "reversal" – where a standing order or direct debit has been returned unpaid – and "transfer" – where you've transferred money between your accounts with that bank.

Is it worth it?

This is the real backbone of being a Cancellation Hero – evaluating whether each payment is worth it. With every single one you find, ask three questions (see Martin's Money Mantras). Work through these three key questions, then if it isn't doing you any good, CANCEL IT (ensure you aren't in breach of contract by doing so first, see below).

Ask yourself: Do I use it?

Ask yourself if you actually use what you're paying for. Be ruthless. Many people think they use a magazine subscription when they actually only glance through one in five copies. So in this case, buying individual mags only when needed is likely to cost far less, making the unused mag subscription a waste of cash.

I just checked Jan membership renewals (I work in a health club) 8.65% who joined last Jan came 10 times or fewer"

- via Twitter

Ask yourself: Is it worth it?

To help, work out the real cost per go. For example, use a £50-a-month gym membership three times a week and you're effectively paying just over £4 a time. Yet go three times a year and you're effectively paying £200 for each workout – the same as a posh spa weekend! Some Cancellation Hero confessions sent to us via Twitter:

I worked out I've paid £140 for a 20 minute swim!

I once paid £1,440 golf membership for 18 holes!

A friend worked out that last year, each gym visit cost £76.

Even if the payment's for something worthwhile, that still doesn't mean there aren't dangers (see below). Use the Regular Payments Calc below to see the yearly cost. £20 a month mightn't sound like much, but £240 a year is!

Do a Regular Payments Audit Stop wasting cash! Check the REAL cost of your payments.


How much does it cost?

£s per month

What do you earn?

Now try the full Demotivator and Budget Planner to calculate all spending
This costs you £/year
It will take you  hours to earn this money.

Ask yourself: Is it available cheaper elsewhere?

Of course, being a Cancellation Hero is primarily about cancelling unnecessary regular payments altogether. But if you don't want to cancel, see if it's available for cheaper elsewhere. There's masses you can do to swashbuckle down pricey subscriptions:

  • Gyms: Check out cheap pay-as-you-go, no-frills and council gyms, plus there are loads of free trials available to help you pick. Find full info in the Cheap Gyms guide.

  • Broadband and home phone:It's possible to make huge savings by switching your provider. See the Cheap Broadband and Home Phones guides for best buys.

  • Energy bills: Switching can cut costs by £200+ over a year, plus you can bag cashback on top. See Cheap Gas and Electricity.

  • Magazines: If you rarely read them, it may be cheaper to just buy them individually when you'll read them. If you want to keep your subscription, here's a trick to help. Tesco Clubcard points are worth more if used on Tesco Deals. These include mag subscriptions, eg, InStyle, Cosmo and Nat Geographic, meaning you can effectively get them for about half price. See the Reclaim Lost Tesco Points guide.

  • TV subscriptions: Check what you watch with a channel audit, then use comparison sites uSwitch* and Simplify Digital* to see if you can get it for less – see Cheap Digital TV for the full bag of tricks.

  • Haggle, haggle, haggle! Even if you do use it, see if you can haggle it down. A five-minute call can save £100s. See the Haggle on the High Street guide for more. Plus, if you're making regular payments for car or home insurance, you're being stung (see below). Some inspiration sent in via Twitter and the Cancellation Success forum:

I did what you said and haggled. Managed to save nearly £400 on a 2 person LA Fitness gym membership. Thank you!

Phoned and asked what they could do for a loyal existing customer. Without hesitation I was given free line rental for a year saving me nearly £150.

Phoned bank to 'discuss' cancelling my pay monthly account and got it half price for 6 months.

We want to know what wasted payments you've found and what you've saved. Let us know in the Cancellation Success discussion.

The Good, the Bad and the Ugly

If you don't use it, don't pay for it. Yet even if you do, making a regular payment may not be the best thing for you. Being a Cancellation Hero's about bringing your bank account bandits into control so to help, here's our quickfire round-up of the good, the bad and the ugly:

THE GOOD: Regular payments that save you money

Good cowboy

Using regular payments can help organise your finances, plus paying by direct debit can mean discounts:

  • Gas & electricity bills

    Paying by fixed monthly direct debit can save you up to 8%. See Cheap Gas and Electricity.

  • Home phone & broadband

    Providers can often sting you with extra charges if you pay by cash, cheque or any other method other than direct debit. See Cheap Home Phones and Cheap Broadband.

  • Use standing orders to manage your cash

    Standing orders can be a very powerful budgeting tool to control your spending. See the piggybanking section of the Budgeting guide.

THE BAD: Regular payments that cost you more

bad cowboyAlways watch out for these, and do everything you can to opt for a cheaper payment option:

  • Car & home insurance

    Paying monthly means you're loaned the cash, often at sky-high 20%+ APRs. If possible, pay in lump sums to avoid interest. See Cheap Car Insurance and Cheap Home Insurance.

  • Credit card minimum repayments

    These are a hideous invention, designed to keep customers perpetually in debt and paying a fortune. See the Minimum Repayments guide.

  • When you don't have the cash

    Bounce a direct debit and/or go beyond your authorised overdraft limit and you'll be hit with bank charges of up to £35 a go. This site's been at the forefront of the campaign to Reclaim Unfair Bank Charges, yet it's always best to avoid 'em. Know what's in your account and what's due to come out. See the Budgeting guide.

The Ugly: Auto-renewals – don't pay the lazy tax

ugly cowboy

This is a big WARNING: auto renewals can be dangerous. That's the name for any insurance policy or any other which automatically takes payment for a new policy on the anniversary of your old one – usually at a vastly inflated price.

Insurers and other auto-renewal beneficiaries rely on your inertia to keep charging you huge amounts year after year. See our car insurance article for how this works.

Always diarise when your insurance policies are ending. Then use comparisons to find your new cheapest policy

Put an alert in your diary for 30 days before your insurance policy is due to end. That means you can cancel your old policy – and find a new one that's a better deal.

Avoid, detect and fight these unpleasant transactions! Read the car insurance and home insurance guides to find the best new deals. And then repeat the process next year!

Am I allowed to cancel?

You can cancel direct debits and standing orders when you like, but there are two crucial points to check before you do this:

golden handcuffs
  • Check whether you're in contract before cancelling.

    If you're in a contract cancelling may be a breach, so check the paperwork first.

    Notice may be required, or there may be penalties for early cancellation (which can be cheaper than keeping it going). It's especially been a problem with gyms, though the situation now differs depending on who you're with – see Cancelling Gym Contract Help for more.

  • Don't think: "I've not claimed on my insurance so it's worthless".

    Even Cancellation Heroes treat insurance carefully. By definition, you pay hoping you won't use it. Of course, that doesn't automatically make it good value, but think carefully before cancelling.

    For full info on how to slice insurance costs, see the Cheap Home Insurance, Car Insurance, Breakdown Cover, Boiler Cover and Travel Insurance guides.

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