You are here: Home - Credit Cards & Loans -

Brits warned over real cost of bounced direct debits

Written by:
Bounced direct debits can end up costing consumers much more than just the fine imposed by their bank, research has revealed.

According to a new report by thinkmoney, 42% of current account holders in the UK have paid charges due to their bank refusing to honour a payment because they did not have sufficient funds.

Most basic bank and current account providers charge for this, with some demanding as much as £25.

However, bill issuers also charge for a missed payment, racking up yet more costs for the consumer.

According to the report, loan and credit card providers typically charge £12.

Missed payments can also result in consumers missing out on any promotional rates they had, such as a 0% balance transfer offer, potentially adding hundreds of pounds in interest charges to bills.

Mobile phone providers, utility firms and pay TV companies can also charge interest and reserve the right to add unspecified ‘admin charges’, while others may limit their service.

The report found that some utility providers will allow you a couple of missed payments but will then cancel your direct debit and you may have to return to a more expensive tariff.

Ian Williams of thinkmoney said: “Missed payments can end up costing you a lot more than you realise. Although many people are aware that a bank will charge you for returned payments, charges made by the company itself can often prove to be an unwelcome surprise, as can losing access to their services and losing promotional rates or good deals.

“If paying your monthly outgoings on time is something you struggle with, having someone to ensure all your bills are paid on time each and every month could be ideal.”

Missed payments can also leave a negative footprint on credit reports and therefore damage peoples’ credit rating.

This could potentially make it harder to get credit in the future, or make credit more expensive.


A selection of bill issuers and what they charge

Tesco/M&S Bank loans  Up to £12 charge.                    
Sainsbury’s credit card £12 charge.
Virgin Money Credit Card £12 charge and promotional rates will no longer apply should you be late.
Barclaycard    £12 charge.
Wonga £20 fee if customer cannot be contacted during the day the payment is due.
Orange £5 charge each time Orange attempt to take a payment out and it bounces back.
Virgin Media May charge £10 plus service limitation.
Nationwide Mortgage No charge for a missed Direct Debit. However, if you then fall a month or more behind – a monthly arrears fee of £23 applies (if no agreement is made and maintained to repay the outstanding balance).
O2 Charge interest daily at the rate of 2% above the base rate of HSBC Bank Plc. Additional administration costs may be included. 
EDF Energy Charge interest at the yearly rate of 8% above the base lending rate of HSBC Bank Plc.

 source: thinkmoney



Tag Box

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Big flu jab price hikes this winter: Where’s cheapest if you can’t get a free vaccine?

Pharmacies, supermarkets and health retailers are starting to offer flu jabs ahead of the winter season, but t...

Is now the time to fix your energy deal?

Fixed energy tariffs all but disappeared during the energy crisis. But now they are back with an increasing nu...

Everything you need to know about the pension triple lock

Retirees are braced to receive another bumper state pension pay rise next year due to the triple lock mechanis...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

The best student bank accounts in 2023: Cash offers, tastecards and 0% overdrafts

A number of banks are luring in new student customers with cold hard cash this year – while others are compe...

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Money Tips of the Week