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What is a returned Direct Debit?
Published 14 March 2016 by Emily Bancroft
If a Direct Debit is ‘returned’, what does it mean for your finances?
Automatic payments can make it easier to cover all of your bills as you won’t have to think about making each payment manually. But what does it mean if you have a returned Direct Debit? Does the money go out of your account or will you have to arrange an alternative payment?
Returned Direct Debits are when a company tries to take money from your account through a Direct Debit but you’ve not got the funds to cover the bill. This means your payment is late, which could lead to services being cut off or products not being delivered. What’s more, you could also be hit with a fee because your Direct Debit has bounced.
Payments not made
There are so many bills to think about when you manage the finances for your household. You’ve got your rent or mortgage, your utility bills, internet payments, home insurance – and that’s not even mentioning any extra payments if you’ve got a car as well.
With all of these financial commitments to juggle in your head, it can really help if you’ve got the option to set up Direct Debits to cover all of your bills. This means the money will go out of your account automatically, usually on a set date in the month, so you wouldn’t have to worry about paying the bills yourself.
However, if you have an unexpected bill or just some extra expenses you hadn’t factored in, this could mean that there’s not enough money in your account to cover the Direct Debit when the company tries to take it. This is known as a returned or bounced Direct Debit and – depending on the company who the money is owed to – could see you missing out on certain services.
For example, if your broadband provider tried to take money from your account but this payment bounced, your internet would probably be cut off until you could afford to pay the bill.
Fees to pay
A service being cut off isn’t the only concern when a Direct Debit is returned – you could also have a fee to pay too. Some account providers could charge you as much as £25 every time a payment bounces and you may also have to pay for going into an unauthorised overdraft too.
If you’ve got two or three bills due to go out of your account on the same day, you could be charged a returned Direct Debit fee for each of these separately – and this could end up quite expensive.
thinkmoney Managed Current Account
One way to organise your finances so you’re less likely to have a bounced Direct Debit payment is with a budgeting account like the thinkmoney Managed Current Account. Whenever you get an income paid into the account, we’ll set aside the money needed to cover any regular bills you’ve told us about. You’ll then be able to spend the remaining money, safe in the knowledge that the important things will be covered.
The thinkmoney Managed Current Account has a monthly management fee of £17.50 a month or £24.50 for a joint account – for more information about how the account works, click here.
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