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Brits warned over real cost of bounced direct debits

Tahmina Mannan
Written By:
Tahmina Mannan

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