Five direct debit myths busted

Harriet Meyer / 21 April 2016 ( 28 April 2017 )

Is paying by direct debit safe and what happens if there is a problem? We look at some of the myths and misconceptions around these automatic payments.

Consumers often sign up to pay regular bills by direct debit – but there are fears the process could penalise them. 

Here we bust five myths about this method of payment:

1. Firms can take money whenever

Payments by direct debit are taken automatically from your bank account on the due date – but this doesn’t mean firms can take money whenever they want.

In fact, companies have to give advance notice if they want to change the date. The process simply means you will never be late with payment, assuming no glitches. This can prove beneficial – as it means you can’t forget to pay a bill.

Of course, it’s also wise to regularly monitor your direct debits. If you are paying for services you don’t use, cancel them.

Is paying by direct debit safe?

2. My money could vanish

Any company you have supplied your account details to cannot raid your account. You have to be given notice of any changes to the sum being taken.

Direct debits are very different from continuing payment authorities (CRAs). These allow companies to take money whenever they think they are owed a sum, and are often used by subscription services. If you are paying this way, try switching to direct debit.

Did you know that you can pay for your Saga Magazine subscription by direct debit? Find out more...

3. It’s not safe to pay this way

Actually, direct debits protect consumers. Before a company can offer this as a payment option, it goes through a vetting process. Their processes are monitored by the banking industry.

Payments are protected by your bank. It will guarantee to return your money if there is an error in the process.

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4. I will lose control of my account

You have a right to tell your bank to cancel direct debit payments any time you like. The majority enable customers to action this through their online banking systems.

If there’s an error in the amount that’s been taken from your account, you can get a full refund from the bank, rather than the company itself.

However, if you’re in a contract check the terms carefully. Notice may be required, and you may face a penalty for early cancellation.

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5. It’s more expensive

In fact, many utility and financial firms offer discounts if you pay this way – or the option to avoid additional charges. The cheapest energy tariffs are often only available customers paying by direct debit. Phone providers often add charges for not paying by direct debit.

However, it doesn’t always make financial sense to pay bills by direct debit. For example, paying for home or car insurance every month may cost more. In this case, interest charges may be levied. Failing to pay your TV licence as a lump sum may also mean higher charges.

Keep control of your finances, save money and avoid getting ripped off with Saga's extensive range of money articles.


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The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.