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5 Min. Read

How to Cancel a Direct Debit: Everything You Need To Know

How to Cancel a Direct Debit: Everything You Need To Know

Cancelling unnecessary Direct Debit payments is one of the more satisfying elements of spring cleaning your finances. Just make sure you don’t fall foul of any potential negative consequences by making sure you follow the correct cancellation procedure.

Here’s What We’ll Cover:

What Is a Direct Debit?

What Is the Direct Debit Guarantee?

Using Direct Debits Well

How Do I Cancel a Direct Debit Instruction?

What Is a Direct Debit?

Setting up a Direct Debit mandate allows an organisation or company to take an agreed amount of money from your account on a regular basis. There’s a lot of flexibility with this type of arrangement. It can be a monthly payment, quarterly, bi-annually or annually and can be for a fixed or variable amount of money.

You can set up Direct Debits for your clients through your FreshBooks account. Simplicity and security for them. Fully integrated invoicing and payment records for you. A definite win-win!

What Is the Direct Debit Guarantee?

The Direct Debit Guarantee gives you an excellent level of consumer protection. All financial institutions that offer Direct Debit payments are vetted and bound by the Direct Debit Guarantee.

Basically it means that any mistakes made by the bank, building society or organisation you’re paying must be immediately refunded to you – before any investigation. This means that if an unauthorised payment goes through, after you've cancelled a Direct Debit, your bank must refund you straightaway. Of course if you’re refunded in error, you’ll need to pay them back.

It also means that the company or organisation must give you 10 working days’ notice if they want to change any of the details of your scheduled payment, including payment amounts or date of payment collection.

Using Direct Debits Well

We pay for all kinds of things using Direct Debits because they are convenient and safe. Utility bills, subscription payments and membership fees are easily taken care of with Direct Debit automatic payments.

When was the last time you checked yours?

It's common to still have payments to insurance companies for items that you no longer have. And no one wants to be giving away a monthly loan repayment on a debt you've already paid off!

A regular check on all your outgoings is a great way to keep on top of your business and personal finances.

How Do I Cancel a Direct Debit Instruction?

There are 4 steps to cancelling a Direct Debit instruction. Let’s get rid of the ones you no longer need.

  1. Check Your Contract

You need to read the small print of any contract before you go ahead and cancel a Direct Debit payment with your bank or building society. Breaching any contract can land you in trouble, which almost always means penalties. Sometimes it makes more financial sense to see out the end of the contract, even if you’re no longer using the service, because of early cancellation fees. Your contract may include a notice period that you have to allow the company to process any cancellation requests.

  1. Talk to Your Bank

You can cancel a Direct Debit instruction over the phone, in a branch, or using your online banking facilities. But it’s wise to follow this up with a written confirmation of the cancellation. This can be by email, or in the post.

Allow at least one full business day before the cancellation comes into effect. In other words, don't leave it until the last minute to put in a cancellation request.

  1. Speak to the Company or Organisation

It’s best to personally contact the company or organisation that you’re cancelling the Direct Debit to. That way, you can double-check any contract, confirm the date the Direct Debit payments will stop and get everything in writing.

Companies will receive an automated Direct Debit amendment and cancellation service (ADDACS) message from your bank or building society. This ADDACS system is how ‘payment service providers’ (banks) talk to ‘service users’ (companies and organisations we send Direct Debit payments to) when ‘customers’ (you and me) change Direct Debit instructions. Even if you don’t contact them directly, this ADDACS message will tell them you’ve cancelled a Direct Debit to them.

  1. Follow Up

You need to check subsequent bank statements to make sure that your Direct Debit cancellation comes into effect and you’re not charged for any future payments.

Stop wasting your hard-earned money on direct debits for things you just don’t need. Set aside a bit of time to go through your FreshBooks account and do a thorough direct debit audit. Make sure you know what they’re all for, if they’re tied to a contract and get rid of any you no longer use. Just a small time investment can save you a substantial amount of money in your business and personal finances. Now, what will you spend it on…?