Safeguard your finances from Direct Debit risk
As the range of digital subscription services continue to expand, direct debits are becoming increasingly more common. In setting up and authorizing a direct debit, a service provider or third party will be able to automatically debit money from your account at specific times to pay bills or make a loan repayment. While the payment method can save time and effort, it’s not without its risks as you do give up some amount of control over your finances. There are number of different concerns for consumers to consider before establishing a direct debit.
Do you trust the service provider?
There is always a chance that you’ll be debited by dishonest service providers. Save yourself the hassle and do your own research before enabling a direct debit.
Do not forget your ‘Set and Forgets’
Stay aware of your finances. Try not to ‘set and forget’ your direct debits to such a degree that you lose track of them. Instead, try to remain conscious of your bills and monitor your nominated bank account so that you know when your money is debited and how much you need to keep in your account to cover the bills.
Many new online services (such as Uber) include ‘surge rates’ – price increases during periods of heightened demand. While rate changes are communicated to the consumers beforehand, it is certainly another thing to be mindful of.
If you are using overseas-based subscription services, you may be charged different prices from period-to-period (sometimes significantly so) based on the exchange rate. Try to keep an eye on currency rate fluctuations to avoid unpleasant surprises.
The costs of a free trial
Many digital services offer free trial periods, but give only cursory warning of when they’ll start charging your account. If you do chose to take advantage of a free trial, try to remain aware of when your free subscription expires or risk the unplanned-for activation of the billing cycle.
Fix it up
It's a good idea to set a fixed dollar amount (if possible) and a fixed date for your direct debits. Even better if you can organise them to debit on the day after your payday. This will ensure that you will have enough money in your account to cover the bills and avoid overdraft or late fees. If the service involves variable payments, be sure that you always check your bill before the amount is deducted in order to keep track of how much is being withdrawn.
Often businesses may offer a discounted rate for setting up a direct debit, but why not ask if you are still eligible if you set up automatic payments through your bank? Using this method, you still retain the control to start, stop and change a payment yourself.
How to Cancel a Direct Debit
- First of all try to cancel the service through the service provider’s website. Typically there are simple options to stop the billing process.
- If you cannot get in contact with the provider of the service, make sure you send an explicit written instruction to cancel the subscription to your financial institution. Remember to include the date you would like to end your direct debits and ask for a letter confirming your request. If need be, try to reverse transactions and claim money back.
- If all else fails, lodge a complaint to the Financial Ombudsman Service or the Credit Ombudsman Service.
Do you have any questions about past or present debit debits? Contact us know today and we can assist you with them.
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