How to Cancel a Direct Debit

Many utility companies, credit card companies, telephone companies, and insurance companies offer the convenience of direct debits to their customers. They are fast, easy and expedient.

Direct debits are a convenient way for consumers to pay their bills on time and avoid the late penalties incurred as a result of forgetting to mail payments or make telephone transactions. Additionally, it saves time and in many cases money as some companies offer incentives for setting up automatic debits.

Though beneficial in some ways direct debits also have several disadvantages. When consumers elect to have payments automatically debited from their accounts they have to closely keep track of their balances to ensure that there are sufficient funds to cover the debited amount. This can be difficult with bills for utilities and other expenses that vary on a monthly basis.

In addition, direct debit can incur charges exceeding late penalties if customers do not have enough money to cover the expenses and they are assessed with overdraft fees or returned item fees. Moreover, customers are usually assessed with more than one fee since having one overdraft tends to create a domino effect.

However an equally costly disadvantage to having recurring payments deducted from a bank account is the fact that many people forget to cancel direct debits when they cancel a service. Consequently, they continue to pay direct debits once they no longer need or want the services provided by the debiting merchant. On average people continue to pay for magazine subscriptions and gym memberships up to three or four months after they have cancelled the service.

Consumers falsely conclude that once a service or subscription has been cancelled, the direct debit will stop. However, certain steps must be taken before an automatic debit is stopped.

Finally, if there are mistakes in the amount being debited from a customers’ accounts it is difficult to dispute the errors and for them to recover the money that was erroneously deducted. There are a few circumstances in which cancelling a recurring debit is justified when you have: terminated the agreement with the company or merchant; to change payment methods; to dispute the bill for any legitimate reason.

Although it is difficult to cancel direct debit payments once they have begun, it is not impossible.
As a consumer you have the right to cancel direct debit payments at any time and for any reason. The first course of action is to contact both the bank and the merchant to find out the procedures for cancelling a direct debit.

Next you should write a letter to both the merchant that is directly debiting your account and to your bank indicating that you wish to cancel your direct debit. Retain a copy of the letter as proof that you cancelled the direct debit. Call both parties a week later to make sure they have received the cancellation request.

If the direct debit is not cancelled, write a complaint letter to the financial institution. If another transaction is made after you have cancelled the debit, you should request that the bank reimburses you for debited funds along with any fees.

If they bank still does not honor your request to cancel the direct debit, contact the bank’s immediate regulating agency, or seek external resolution through companies such as the Better Business Bureau. Be sure to include copies of all correspondence, and provide information about the responses you received.

During the direct debit cancellation process it is important for you to make other payment arrangements if you still owe the merchant for goods or services provided by them. If all financial obligations have been settled, and the merchant continues to debit the account, report the merchant to the appropriate regulating agency.

If all other procedures fail, you could have the account closed, and open another account. This method is selected as the customer’s last option because it requires notifying employers and other merchants of the change, which would be both time consuming and inconvenient.