If you didn’t cancel that DD, you could be contributing to the £13.7billion we as a nation throw away each year by paying for direct debits we no longer need.
Who’s paying what?
Research from MoneySuperMarket has found that 89% of UK adults currently use direct debits, paying out an average of £311 per month, with a quarter (26%) shelling out over £500 a month in automated payments.
The problem is that half of these direct debit users haven’t a clue how many payments have been set up, while 7% - or some 3.6million people - admit they’re currently paying for unnecessary bills.
The research also reveals how those of us who are regularly paying unnecessary bills are doing so to the tune of £70 a month – all of which adds up to an eye-watering £13.7billion leaving our collective accounts for no good reason at all.
And it’s even worse for those in the 18-34 age group as around a fifth (18%) have no idea how many direct debits they have set up and in the process are throwing away around £97 a month, or £1,169 a year.
So where is all this money going?
Check statements, cancel payments
We’re effectively washing money down the drain as one-in-five (20%) of us admit we are still paying utility companies for services we no longer use, while 17% are paying for a needless phone contract and 16% for insurance that’s no longer needed.
And it’s that 18-34 age bracket forking out more than any other, with a quarter (25%) still paying an old phone contract and just over one-in-ten (12%) paying for a gym membership they’re not making the most of. Incidentally, if you’ve a gym contract you could do with getting out of, read my article Given up the gym? Now it’s easier to get out of your contract.
The problem appears to be that we set up these direct debits to ensure we never miss a payment for the services we’re after, but then forget to cancel the things when our interest wanes and don’t regularly check our accounts to see where we’re up to - 5% of people scrutinise their bank statements just once a year.
And while we can get services at a reduced rate by paying for them via direct debit, this quickly becomes a false economy if we carry on those payments when we no longer require that service.
Kevin Mountford, head of banking at MoneySuperMarket, said: “Direct Debits are an easy and convenient way to make payments for household bills, subscriptions and memberships for the majority of bank account holders in the UK. Households face a huge number of outgoings which they may lose track of, therefore an automatic payment can help to keep on top of managing bills and avoid the issue of missing payments and accruing charges and fines.
“However, consumers must be proactive and manage their own finances to ensure they are not throwing money down the drain by paying Direct Debits they no longer use, especially at a time when many household finances are still under pressure. A relatively small monthly payment soon adds up to a lot of money and there is just no excuse to let these lie. You should have a clear idea of what is coming in and going out of your account each month - spend five minutes looking at statements and identifying any mysterious payments you don’t recognise. You should also consider payments such as unused gym memberships or annual subscriptions, as this could shave excess pounds off your monthly outgoings.”
So make sure you regularly check your statements and if you’re still paying for something you no longer want or need, contact the company in question to cancel the service then do away with the direct debit by cancelling it with your bank.
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.