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Why you're throwing away money on direct debits

Why you're throwing away money on direct debits

How much do you pay out in direct debits every month? The answer is probably rather more than you think.

On average, we each pay out a whopping £311 each by direct debit every month, according to new research from MoneySupermarket.com.

One in four of us shell out more than £500 a month.

Direct debits are a handy way to cover for essentials services such as council tax and utilities, mobile phones and broadband, motor and household insurance, and extras such as gym subscriptions. They ensure you don't accidentally miss a monthly payment, racking up penalties and doing unnecessary damage to your credit score as a result. Direct debits also save you a lot of bother. You set them up, then forget them.

Unfortunately, that's where the problems start 

Too many people do exactly that, setting up regular payments only to forget about them altogether. That means they keep shelling out long after they need the service they are paying for.

Half of direct debit users confess to having no idea how many automatic payments they have set up. Millions are forking out money unnecessarily every month as a result.

MoneySupermarket.com's research estimates that we spend an average £70 a month on bills and services that we no longer use. That adds up to £840 a year.

Younger people are particularly prone to making this error.

One in four 18 to 34 year olds are paying for a mobile phone contract they no longer need, with a further 12% paying for a gym membership they no longer use.

The over-55s tend to be more savvy about cancelling direct debits, although nearly one in four still have automatic payments set up for unnecessary utility bills.

the easy solution

It should only take a few minutes to check your direct debits, and cancel those you no longer need.

While you're doing that, take things a step further, and work out whether you can get a better deal on those services you do still want.

Car insurance is a good example. Too many motorists keep paying monthly premiums to the same insurer, year after year, without ever checking if they are getting a good deal.

The simplicity of direct debits are partly to blame.

Next time your motor policy expires, don't just auto-renew. Visit a comparison site to see if you can get a better deal elsewhere. Then do the same with your household insurance, broadband and utility providers, and so on.

Used carefully, direct debits are a quick and easy way to manage your money. But they are also a quick and easy way to throw it away.

Read more articles by Harvey Jones here