As the range of digital subscription services continue to expand, “direct debits” are becoming increasingly more common. In setting up and authorising a direct debit, you’re permitting a service provider or merchant (i.e. retailer or business) to automatically debit money from your account at specific times (for example, to pay bills or make loan repayments).
While the payment method can save time and effort, it’s not without its risks as you give up some level of control over your finances. Because it’s like giving someone permission to take money out of your wallet every now and again, there are number of different concerns for consumers to consider before setting up 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.
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.
New online services (such as Uber) could 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.
Many digital services offer free trial periods, but give only cursory warning of when they’ll start charging your account. If you do choose 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.
For online subscriptions (such as Netflix, Stan or online dating sites), you should always check the terms and conditions for when the subscription ends, and if there’s any notice period you need to give the service provider to end the service. If you don’t terminate the service with the given notice period, you could be up for another term if your subscription automatically renews itself.
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 a day or two after your payday. This will ensure that you will have enough money in your account to cover the bills and avoid being charged overdraft or dishonour fees from both your financial institution and the merchant or service provider. If the service involves variable payments (i.e. where the merchant deducts the exact amount of each bill, instead of a fixed amount), 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 yourself through your online banking? Using this method, you still retain the control to start, stop and change a payment yourself.
You should always ask for alternative methods to make payments to your service provider and be careful of those who don’t offer any other payment options and are pressuring you into a direct debit arrangement.
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 service provider, make sure you notify your financial institution that you are cancelling the direct debit arrangement. 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. You should also send a letter to your service provider at the same time to cancel the arrangement.
If all else fails, lodge a complaint to the Financial Ombudsman Service or the Credit and Investments Ombudsman.
Do you have any questions about past or present debit debits? Visit our website or contact us today on 1300 747 747 for more information or assistance.
2016 Qudos Mutual Ltd trading as Qudos Bank ABN 53 087 650 557 AFSL / Australian Credit Licence 238305 BSB 704 865