Stop money leaking from your accounts & credit cards

20th July 2010  

In recent years the best credit card companies have been making it easier and easier for us to pay our regular monthly commitments using our credit cards. Indeed they’re been actively trying to push into the commercial market occupied by the Direct Debit system.

For many people, paying regular commitments via credit card is useful alternative. You don’t need a bank account if you use prepaid credit cards, and there’s usually no fee if the company you’re paying goes to collect an amount and there’s not enough money or credit to meet the payment, unlike the Direct Debit System.

Funds are deducted from bank accounts (via customers debit cards) or added to credit card bills after customers agree to what is known as a Continuous Payment Authority (CPA).

But it appears that each year thousands of credit card users complain to the Financial Ombudsman because once they’ve given their card details to a retailer, they have trouble stopping money wrongly coming from their accounts. Unlike a Direct Debit which you can cancel easily online or with a simple phone call to your bank, unless you cancel your credit card, it’s difficult to stop payments if the retailer is hard to contact or doesn’t want you to stop paying them.

The BBC’s MoneyBox Live program cited a credit card customer Reg Nicholls from Cambridgeshire in the UK. Reg signed up for a virus checker for his computer as part of his internet package and agreed to a CPA.

But later, when he decided to change his provider, he discovered that the virus checking was now done by a separate firm which he couldn’t trace or make contact with.

As money continued to come out of his account for a service he wasn’t using, Reg thought that, like a direct debit, he could tell his bank to stop making the payments.

“I wasn’t really aware this was different from a direct debit. I felt really frustrated because it was my money, my account, yet I was powerless to stop the payments”.

Many people are aware of, and use CPA’s, but they may be surprised to know that not even changing your card or closing your account is enough to stop their liabilities. Its vital that if you want to close an account, or stop payments that you make contact with the retailer or the company you’re doing business with.

Consumer Watchdog, Which? says payments should be subject to the same controls as direct debits and therefore be easier to cancel. But the banking industry says it is not liable for this type of contract.

The UK Financial Ombudsman’s David Cresswell said

“Where you can give evidence to your bank that you really have tried to say to the company ‘stop taking my money’, we really do expect your bank to take account of that, and help you.”

Our advice is therefore, when you agree to a CPA on your credit card or debit card, at the same time make sure that you have the exact details of what it takes with that retailer to stop or cancel the payment. Write down the details and keep them safe with other financial information like bank statements, it maybe a while till you need them.

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