It’s easy enough to do. You sign up for a ‘free trial’, or ‘free offer’ without reading all the fine print… then charges start appearing against your account.

The good news is, the Australian Payments Clearing Association’s banking practice codes place certain obligations on financial institutions.

If you ask your financial institution to stop, amend or cancel a direct debit payment, or dispute a transaction, it must act on your request and must not simply direct you to the biller (although in some cases, service fees may apply, so contacting the biller may be worthwhile).

It must do so promptly and – in the case of cancellation requests – ensure as far as practicable, that no further direct debits are made.

When you dispute a direct debit payment, your financial institution must contact the biller’s financial institution. The biller must provide proof that you have given permission for money to be taken straight out of your account. Otherwise, a full refund must be made.

What to do

Credit card direct debits rules can vary as they depend on the terms and conditions of your credit card contract, but the Financial Ombudsman Services recommends that you do the following.

  • Write to both the biller and your bank at the same time – cancelling your authority to debit your credit card account.
  • Check your next credit card statement carefully. If the transaction has been debited to your account, contact your bank and dispute the transaction. Do this straight away as credit card terms impose time limits on processing charge backs.
  • The bank will then start the charge back process if it is available to you.
  • Check subsequent statements as well and dispute any further transactions that appear.

Check also, to make sure that canceling the direct debit doesn’t leave you in breach of contract with the biller: see right.

Watch those “T & C”s

Often direct debits from a credit card are linked to a contract for goods or services which you have purchased.

As such it may be a term of the contract that you pay by direct debit. You could therefore be in breach of your contract if you cancel the arrangement. Make sure you check the terms and conditions, and if necessary seek professional advice.

Note also that cancelling a payment arrangement may not relieve you of your obligations under your contract with your biller. Check the cancellation terms and again… if necessary seek professional advice.


What are your thoughts?

Have you experienced unexpected direct debits against your account? Are your credit cards in control? Is there anything else you’d like to know about credit cards.

Join the conversation — leave a comment below and let us know what you’re thoughts are.

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