Cancelling a direct debit

Direct debit payments are convenient for paying your bills but, when your income is reduced, getting more control over your payments will probably be more important.

When your income drops, you should consider cancelling all your direct debits unless you can keep sufficient money in your bank account to adequately meet the payments. You’ll still have to pay these debts, but you will have taken control over who, how, and when you make payments.

You can cancel direct debit authorisations

Banks (and businesses that encourage payment by direct debit) may initially tell you that you cannot stop a direct debit. You can – it’s your money and it’s your bank account. Your bank must follow your instructions to cancel a direct debit unless it is from your credit card.

Be careful if making payments by direct debit is a condition of your contract and you want to cancel the direct debit authorisation. You may place yourself in breach of contract if you cancel where you have signed up for a specific minimum term, so you should seek legal advice in these circumstances before taking any action.

Setting up ongoing payments from your credit card is different to authorising a direct debit from your bank account (such as a savings account) and requires a different cancellation process. Both are explained below.

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How to cancel a direct debit

Write to your financial institution (and send a copy of your letter to the business you pay using direct debit) and instruct them to cancel your direct debit authorisation forthwith or on a specific date. The bank cannot lawfully refuse your written request for cancellation. Ideally, take the letter to your bank so that your instructions are acted on immediately.

To cancel a direct debit on a credit card account, you should first write to the organisation with whom you have established a direct debit, instructing them to cancel the arrangement and send a copy to your financial institution. If the debits continue you can then request your financial institution to reverse the transaction as it is unauthorised.

Often direct debits from a credit card are linked to a contract for goods or services which you have purchased and it may be a term of the contract that you pay in this way. You could therefore be in breach of your contract and should seek legal advice before doing this.

Sample MoneyHelp letter: Instruction to your lender to cancel a direct debit authorisation from savings or other non credit card account (MoneyHelp Sample Letter)

Sample MoneyHelp letter: Instruction to trader to cancel a direct debit authorisation from a credit card account (MoneyHelp Sample Letter)

Keep copies of all correspondence and statements in relation to your request.

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Making sure your instructions are implemented

Your bank or financial institution must comply with your request to cancel a direct debit authority from your savings or other non credit card account.

If any subsequent payments are deducted, you should be entitled to have any transactions refunded.

If your lender or financial institution fails to cancel the direct debit according to your instructions or to refund you, you may take the matter to the relevant industry ombudsman service. 

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Case study

Tim entered into a loan agreement with a finance company, whereby repayments were to be made by direct debit. He was on time with his payments until the company changed the day of withdrawal, resulting in his incurring a late penalty fee.

Read the entire case study

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