How to manage recurring payments

Recurring payments allow companies to take money from you at any time. They can be for anything from gym memberships to payday loan repayments, but you have the legal right to cancel them.

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Recurring payments work a little like direct debits, although they allow the company in question to take money from you at any point.

This means it can be hard to budget if money is taken out when you weren’t expecting. It is also often hard to reclaim the money if the wrong amount has been taken or to cancel a recurring payment completely.

These payments can apply to lots of different companies but the most common are payday loan firms, gym companies and online subscriptions.

How can I tell if a recurring payment has been set up?

In order for a company to set up a recurring payment, also known as continuous payment authorities or CDAs, you will need to hand over the long number on your debit or credit card instead of your sort code and account number.

If you take a look at your bank statement you should be able to spot these payments by looking for:

  • Any regular payments which aren’t listed as standing orders or direct debits
  • Any regular payments on your credit card, as you can’t set up a standing order or direct debit from your credit card

Set up a direct debit or pay manually instead

If you’re given the option, it’s usually better to pay via direct debit or pay upfront, rather than having a recurring payment set up.

This is because recurring payments can come out at any time, and it’s often hard to cancel them.

If you already have a recurring payment set up, it’s worth finding out if you can change it. Contact the company and ask if you can pay by direct debit instead.

You will have more protection with a direct debit payment because of the ‘Direct Debit Guarantee’. This states that direct debits must be easy to cancel and if a company makes an error with a payment you should get a refund from your bank straight away.

You could also make a manual payment each month, although this is only an option if you know you’ll remember to do it.   

If you can afford it, paying upfront will eradicate this problem and you won’t need to remember to make the payment each month. 

How to stop a recurring payment

Cancelling a recurring payment might be harder than cancelling a direct debit, but it can still be done.

Banks are legally required to cancel these payments and the following steps show you exactly how to do it:

  1. The first thing to do is contact the company and ask it to cancel the payment. If you are in the middle of a contract, such as with a gym membership, you will still need to pay until the contract has ended.
  2. If the firm refuses to cancel the payment, you will need to make an official complaint, which can be done via email or post.
  3. Contact your bank and ask it to cancel the payment if the firm isn’t playing ball. It will need to cancel the payment, and if further payments are taken from your account after you’ve done this the bank should refund you.
  4. If your bank refuses to cancel the payment, make an official complaint to it. It then has eight weeks to look into the complaint. If by this time it hasn’t responded, or you’re not happy with the response, you can escalate your complaint to the Financial Ombudsman.

How to claim back recurring payments

If you’ve asked your bank to cancel a recurring payment, and it hasn’t done so and you’ve still been charged, you should be able to claim this money back.

This applies to any recurring payments set up in or after November 2009 and any money taken after your bank told you it wouldn't cancel the payment.

You can do this by contacting your bank, clearly stating what the payment was, how long it continued after you asked the bank to stop it, and the total amount you paid after this date.

If your bank is refusing to budge, you will need to go down the complaints route. First to your bank, and then after eight weeks to the Financial Ombudsman.

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