Laboratories Credit Union Limited

Safeguard your Finances from Direct Debit Risk

Written by Laboratories Credit Union

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As the range of digital subscription services continue to expand, direct debits are becoming increasingly more common. In setting up and authorising a direct debit, a service provider or third party will be able to automatically debit money from your account at specific times to pay bills or make a loan repayment. While the payment method can save time and effort, it’s not without its risks as you do give up some amount of control over your finances. There are number of different concerns for consumers to consider before establishing a direct debit.

Do you trust the service provider?

There is always a chance that you’ll be debited by dishonest service providers. Save yourself the hassle and do your own research before enabling a direct debit.

Do not forget your ‘Set and Forgets’

Stay aware of your finances. Try not to ‘set and forget’ your direct debits to such a degree that you lose track of them. Instead, try to remain conscious of your bills and monitor your nominated Credit Union account so that you know when your money is debited and how much you need to keep in your account to cover the bills.

Surge Rates

Many new online services (such as Uber) include ‘surge rates’ – price increases during periods of heightened demand. While rate changes are communicated to the consumers beforehand, it is certainly another thing to be mindful of.

Exchange Rates

If you are using overseas-based subscription services, you may be charged different prices from period-to-period (sometimes significantly so) based on the exchange rate. Try to keep an eye on currency rate fluctuations to avoid unpleasant surprises.

The costs of a free trial

For any services offering a “Free Trial” make sure you read all of the terms and conditions before you accept them, to see what you are agreeing to. You may be giving them permission to set up a direct debit to the card details you have supplied.

Many digital services offer free trial periods, but give only cursory warning of when they’ll start charging your account. If you do choose to take advantage of a free trial, try to remain aware of when your free subscription expires or risk the unplanned-for activation of the billing cycle.

Fix it up

It's a good idea to set a fixed dollar amount (if possible) and a fixed date for your direct debits. Even better if you can organise them to debit on the day after your payday. This will ensure that you will have enough money in your account to cover the bills and avoid overdraft or late fees. If the service involves variable payments, be sure that you always check your bill before the amount is deducted in order to keep track of how much is being withdrawn.

LCU can set up a separate account to set aside money each pay to cover the direct debits you set up. The direct debits can be directed to debit this account.

Alternatives

Often businesses may offer a discounted rate for setting up a direct debit, but why not ask if you are still eligible if you set up automatic payments through LCU? Using this method, you still retain the control to start, stop and change a payment yourself.

How to Cancel a Direct Debit

Direct debits set up to a transaction account can be stopped by contacting your financial institution. It is always best practice to advise the provider too.

Direct debits set up to a debit card can be stopped by contacting the provider in writing. You should keep the correspondence in the event that you need to claim back any transactions.

Tip for LCU members:It is better to set up direct debits to your LCU BSB and account number where possible instead of your Visa card – this saves having to update card details when cards are renewed or replaced. This also makes it easier when you wish to stop a direct debit as it can be done through LCU

Do you have any questions about past or present direct debits? Contact us now today and we can assist you with them.