He said people may ‘have far fewer rights’
Martin Lewis has highlighted a payment rule that is “really important for people to understand”. The founder of Money Saving Expert spoke about the different regular payments you can arrange, as one type of payment offers far superior protection compared to others.
During a recent episode of his BBC podcast, the financial journalist explained the crucial differences between recurring payments and direct debits. Mr Lewis said that direct debits come with “powerful protections” that account holders need to know about.
He added that when establishing a regular payment, such as for a gym membership or another subscription service, handing over your long bank card number means the payment will be taken from your card, leaving you with “little protection”.
But if you instead set up a direct debit by providing your bank account number and sort code, you’ll benefit from much stronger consumer rights. Mr Lewis explained: “If it’s a payment from the card as opposed to a payment with the bank account number, then it is a recurring payment, and you have far fewer rights on a recurring payment. This is commonly used for subscriptions like Netflix or DisneyPlus.”
‘Far stronger’ protections
He clarified that when you hand over card details for payment setup, you’re essentially saying “I’m giving you my card details so you can take a payment when you want to take a payment”. The financial expert added: “Each one of those payments is an individual payment, it just recurs.” However, direct debits operate under different rules, with stronger safeguards in place.
Mr Lewis explained: “With the direct debit guarantee, it’s actually far stronger, it’s a specific thing. If you want to cancel your direct debit guarantee, you just need to contact your bank, and they must stop all future payments.
“If you dispute it, because you say it’s been taken in error, it was taken on the wrong date, it’s the wrong amount, it’s taken without authority, with the direct debit, you must get an immediate refund from your bank, even before they go into the dispute process, so it’s very powerful.” In contrast, those using recurring payments may find difficulties in securing refunds.
Mr Lewis said: “With a recurring payment, while you should be able to stop it by going to your bank, I get lots of reports that sometimes that does not happen and they say you have to go to the payment provider Disputing it is far more difficult, it’s no instant, it can be declined, it depends on the card scheme rules, not the statutory guarantee.”
Direct debits offer another benefit – when switching banks via the Current Account Switch Service, these payments transfer automatically. But you’ll need to move over your recurring payments yourself to keep them going.
The consumer champion warned: “So it is always worth being aware, if you are making a payment and they are asking you for the card details, not your bank account details, you have far, far fewer protections than you do if you’re paying with an actual direct debit.”
