Cancelling a direct debit from your credit card does not involve rocket science, but it’s crucial that you pay attention to certain aspects to ensure it runs smoothly
Upon signing up for a direct debit you give someone else permission to request funds directly from your credit card account on an ongoing basis. While this gives you an easy way to make payments on time, there are instances when you might want to put a stop to a particular direct debit. While certain financial institutions might make it seem like cancelling a direct debit is a lengthy and tedious process, the truth is you can do this by following a few simple steps. Before you take these steps though, confirm that you’re not breaching the terms of a contract by cancelling an ongoing direct debit.
Why would I need to cancel a direct debit payment?
Direct debits can simplify how you make payments, but there are instances when you might want to put a stop to one or more direct debits. Some of the most common reasons to stop direct debits include the following:
- There is a change in your income and you want more control in your how handle your expenses
- You want to cancel a subscription, for example, to a magazine or gym membership
- You’ve moved and you want to stop direct debits to previous utility providers
- You want to cancel a direct debit you signed up for in haste or unwittingly
What steps will I need to take?
The Australian Code of Banking Practice states that banks should take prompt action in processing direct debit cancellation requests, and the Mutual Code of Banking Practice has a similar stipulation in place for credit unions and mutual building societies. The steps to cancel a direct debit from a bank account and a credit card vary slightly, and to cancel an existing direct debit from your credit card, follow these simple steps:
- Write a letter to the merchant who has the direct debit authority asking it to cancel the arrangement
- Send a copy of this letter your credit card provider
- Check with the financial institution in a few days to establish if it has cancelled the direct debit
A sample letter and guide
The letter you write to your financial institution instructing it to cancel a direct debit requires you that you mention the account you’re referring to along with the payment you want cancelled. You don’t have to explain why you wish to cancel any direct debit, given that doing so is your prerogative. Bear in mind, though, that cancelling a direct debit in the middle of a contract term can come with repercussions, so it’s best that you get legal advice in such a situation.
[Your name and address]
[Name of bank, building society or credit union]
[Name of branch]
My/Our account name: [ ]
Credit Card Account No: [ ]
RE: CANCELLATION OF DIRECT DEBIT
I/We advise you that I/we have cancelled the direct debit authority previously given to [name of merchant] from my/our credit card account with immediate effect. I am enclosing a copy of the letter I/we have sent to the merchant.
Click here to download this as a Word document to edit directly. To save it to your hard drive, right click and choose “Save As”. Navigate to the folder you wish to save it to and click OK.
When and what can I expect from the response?
Your credit card provider cannot legally refuse to honour your request for a direct debit cancellation. If your card provider refuses to cancel a direct debit, simply inform the representative you’re dealing with that clause 19.1 of the Code of Banking Practice requires the institution to, not just honour your request, but do it promptly. If your credit card provider does not cancel the direct debit, and if it makes further payments through the same direct debit, you can request for a reversal of funds. If you face problems at any stage, you can file a complaint with the institution’s internal dispute resolution team, and if this does not help you can move to the Credit Ombudsman Service or get advice from Consumer Action’s public line.
What else should I be wary of?
Cancelling a direct debit linked to your credit card is not particularly difficult, but there are some factors that you’ll need to keep an eye on:
- Breach of contract. If the direct debit you wish to cancel comes linked to a product or service you’ve purchased in the past, and you’ve to keep making payments for a given time period, cancelling such a direct debit can lead to a breach of contract, which can come with legal consequences. If you plan to cancel any such direct debit, it’s best that you seek legal advice first.
- Implementation of instructions. You instructing your credit card provider to cancel a direct debit is one thing, and it implementing your request is another. As a result, make sure you go through your credit card statements carefully and check if the debits in questions have stopped.
- Time limitations on chargebacks. If your credit card provider doesn’t cancel a direct debit, contact it as soon as possible for a chargeback. This is because card providers have different time limits in place when it comes to processing chargebacks.
Cancelling a direct debit from a bank account or a credit card is not difficult, and one of the main differences is that in case of a credit card you have to get in touch with the merchant you’ve authorised for the direct debit first. You still have to contact your credit card provider and instruct it to cancel the direct debit in question, and you should do this in writing. At every stage, don’t forget that your card provider has to honour your request.
Frequently asked questions
What should I do if I wish to cancel my credit card altogether?
You would first have to pay your account’s outstanding balance in full, and then ask your credit card provider to cancel your account.
Can I ask a service provider to pause a direct debit for a temporary period?
Unfortunately, you cannot. You would have to cancel the direct debit and then restart it again.
I noticed an unauthorised direct debit on my credit card statement. What should I do?
You should get in touch with your credit card provider as soon as possible.