How to cancel a direct debit payment on your credit card

Setting up a direct debit from your credit card can be a handy way to keep on top of ongoing payments such as phone bills or Internet streaming subscriptions. But if you want more control over how and when your payments are made, you can cancel a direct debit.

How do I cancel a direct debit payment?

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:

1. Call, message or write a letter to the merchant (gym, charity, etc.) who has the direct debit authority asking it to cancel the arrangement.
2. Contact your issuer (bank, credit union, etc.) and inform them of the change or send a copy of this letter your credit card company.
3. Check with the financial institution in a few days to establish if it has cancelled the direct debit.

Both the Australian Code of Banking Practice and the Customer Owned Banking Code of Practice state that they will promptly deal with any request you make to cancel a direct debit payment.

How to write a letter to cancel a direct debit payment

If you decide to write a letter or email to cancel your direct debit payment, you need to include details of the direct debit and the account it's linked to. You also need to state that you want the direct debit payments to stop.

The letter below is an example of what you might write to a bank when you want them to cancel a direct debit. Remember that you should add your own details to the letter and make changes so that it's relevant to you. For example, if you're writing to the merchant, you would include details of your account with them instead of the bank and credit card details listed in the example.

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 and should take action promptly. You should follow up by phone or visit a branch if you haven't heard anything within a few days. If another payment is taken out via direct debit after you've sent your request, you can also ask your provider to reverse the transaction.

I think I've had an unauthorised direct debit, is it illegal?

A direct debit that is made without your permission is considered an unauthorised transaction but would only be illegal if it was fraudulent. There are a number of reasons unauthorised direct debits occur, and not all of them are due to fraudulent activity.

Some may be due to human error. For example, if the business that billed you had not correctly cancelled a direct debit after you requested it. Other unauthorised payments can be as a result of system errors. Human and system errors don't break the law but, if the transaction is unauthorised, you can still get your money back using the following steps.

Steps to deal with an unauthorised direct debit

1. Contact the biller/company
   Talk to the company that's billed you so that they can correct any mistake. Normally, complaints are resolved at this stage. However, if the unauthorised debit was due to fraudulent activity from the biller, they are uncooperative or they're difficult to contact, there are further steps that you can take.
2. Contact your credit card provider
   If the business that billed you does not provide a refund, call your credit card provider. If you were charged after cancelling a direct debit or never approved the payment, you can request a chargeback and your credit card provider will reverse the transaction once they have confirmed that it was an unauthorised transaction. This should include any fees or interest charges that may have been incurred.
3. File a complaint with an external resolution scheme
   If it's been 45 days since you made a complaint to your credit card issuer and you still haven't got a result, you can file a formal complaint with the Australian Financial Complaints Authority (AFCA). You can contact AFCA by phone on 1800 931 678 or online through the AFCA website. Make sure you attach a copy of the letter of complaint that you sent to your credit card provider and copies of any responses that you received.

What to think about before cancelling direct debits

Keep these details in mind before you cancel a direct debit payment so that you can get through the process as quickly as possible.

• Contracts and agreements. If the direct debit you want to cancel is linked to a product or service you have signed up to for a set period of time, cancelling it could lead to a breach of the contract. You can avoid this by paying as you go, or by cancelling the product or service completely.
• Processing times. Businesses and credit card issuers usually act quickly when you ask to cancel a direct debit but it still takes time to process the request. Make sure you check when it will be finalised and keep an eye on your statement so you know that no more payments come out.
• Time limits on disputes. If you've been charged after cancelling a direct debit or find any other unauthorised transactions, you'll have a window of time when you can contact your credit card issuer to dispute the transaction. For example, you could have up to 90 days to request a chargeback. But disputes take time, so you should always contact your credit card issuer as soon as possible.

Most of the time, cancelling a direct debit payment is simple. But if you're still having trouble with a particular business after following the steps above, the Australian Competition and Consumer Commission (ACCC) website has details on your rights and how to lodge a formal complaint. You can also lodge complaints against your credit card issuer through AFCA by calling 1800 931 678 if no action has been taken within 45 days.

Frequently asked questions

• 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:

  • Change in income. There is a change in your income and you want more control over how you handle your expenses.
  • Cancel a subscription. You want to cancel a subscription, for example, to a magazine, charity, online streaming service or gym membership.
  • Moved house. You've moved to a new area and you want to stop direct debits to previous utility providers.
  • Cancel a service you no longer want. You want to cancel a direct debit you signed up for in haste or unwittingly.

• What counts as an unauthorised direct debit?

  If you have not agreed to a direct debit payment, it is considered unauthorised. Here are some examples of unauthorised direct debits:

  • You cancelled an existing direct debit but the money still came out
  • The business in question took more than the amount you agreed to
  • You had a payment taken from a business that you have never used
  • You had a payment taken for a service or product that was never delivered

• I noticed an unauthorised direct debit on my credit card statement. What should I do?

  If you don't recognise a transaction on your account, don't panic. Some business names may show up differently on your statement. For example, if a business trades under one name but is owned by a larger corporation. Or, if you've made a payment through PayPal, which can credit the seller then take the payment from your account at a later date.

  These situations can be confusing and it's easy to think a transaction is unauthorised if you don't recognise it. So, try a quick Google search to see if you can find details that identify the business. But if you're not sure, contact your biller or credit card issuer so that they can help you sort it out.

• 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.