Recurring payments explained

If you’ve ever signed up for a subscription, you might have agreed to recurring payments – a method used by some companies to periodically charge their customer’s debit or credit card. But what are your rights if you want to cancel a recurring card payment? Read on to find out what a recurring payment means when you use your card to pay, plus actions you can take if you find an unwanted recurring payment.

The information provided here is for informational and educational purposes only and does not constitute financial advice. Please consult with a licensed financial adviser or professional before making any financial decisions. Your financial situation is unique, and the information provided may not be suitable for your specific circumstances. We are not liable for any financial decisions or actions you take based on this information.

A recurring payment is a way to make automatic payments for goods or services. This type of payment model means you authorise a merchant to take funds from your account on an automatic, regular, and ongoing basis in exchange for goods or services.

Common examples of recurring payments may include:

• Streaming subscriptions

• Gym memberships

• Magazine or box subscriptions

• Online services with a free trial that auto-renews

• Payday loan repayments

• Insurance policies

Recurring payments are also known as continuous payment authorities (CPAs), and they allow companies to withdraw money from your account on an agreed schedule. If you’re paying for something online and provide the long number found on your debit or credit card rather than your bank account number and sort code, you’re likely to be authorising a recurring payment.

Although you have the legal right to cancel recurring card payments, issues can still arise where companies abuse their ability to charge your card without further approval.

It’s important to check your credit and debit card statements regularly so that you can identify any recurring payments and cancel them if necessary.

Recurring payments may look similar to Direct Debits, but they work slightly differently.

To authorise a recurring payment, you simply provide the details on your payment card. The company can charge you regularly, and the amounts might change (depending on the terms you agreed to when you signed up).

With Direct Debits, you give permission for a company to pull money directly from your bank account on set dates. They are often used for things like electricity or gas bills.

An important difference is that Direct Debits come with a Direct Debit Guarantee, which safeguards you against errors. If, for example, you are charged an incorrect amount, you can simply contact your bank for an immediate refund. Although recurring payments don’t offer this kind of protection, you do have the right to cancel and claim back any money taken in error after that.

You should be able to spot a recurring payment on your bank statement. Recurring payments will usually be a regular outgoing that isn’t listed as a standing order or Direct Debit. They can also be taken from your credit card, and might be easier to spot on your credit card statement as you can’t set up a standing order or Direct Debit on a credit card account. If you use a cash card, you may be able to view payments using your provider’s website or app.

1. Contact the company taking the payment and ask them to stop it. You can do this by phone or e-mail, and debt charity StepChange provides a free template letter you can use to cancel recurring card payments by post.
2. Alternatively, ask your bank (or whoever issued your card) to cancel the payment. According to guidance from the Financial Conduct Authority (FCA), your bank must stop the payment once you ask them to (even if you haven’t contacted the business first).
3. Make sure you request cancellation by the end of the working day before your next payment is due, or you might still be charged.
4. If you’re trying to cancel a long-term subscription payment and you’re still in the contract period, the company may refuse the cancellation and you’d have to find another way of paying.

If your bank fails to act on your request to cancel a recurring payment, you must be refunded any money lost after the cancellation. You can write to the complaints department of your card issuer. If they haven’t resolved the issue within eight weeks, or if they reject your claim completely, you may be able to take it to the Financial Ombudsman.

Recurring payments can lead to unexpected charges and are sometimes harder to cancel than other payment methods. You may want to consider the following when setting up payments:

• Check the company first. Look them up on Companies House, read reviews, and check the T&Cs.

• Consider using Direct Debit. These can be easier to cancel and offer refund protection through the Direct Debit Guarantee.

• Be wary of free trials, as they may use recurring payments (or CPAs) that keep charging after the trial ends. Make sure you cancel in time to avoid getting caught in a so-called subscription trap.

• You may be able to use alternative payment methods such as a prepaid card.

• If it’s an option, you might prefer to pay manually, but don’t forget to transfer each month.

You’re eligible to reclaim a recurring payment under the Payment Services Regulations 2017 You can also claim a refund even if your bank or credit card provider refused to cancel the recurring payment or told you to speak to the company directly.

If you’ve already tried to cancel a recurring payment and reclaim any money taken subsequently, your bank will need to review your cancellation request first. If your cancellation was rejected but you didn’t make a complaint to your bank or credit card provider, it is important to do so as soon as possible.

So, how much can you expect to receive if you are able to reclaim a recurring payment? The idea is to put you in the same position as you would have been if the bank had cancelled the recurring payment when you initially made the request. This means you should be refunded any extra payments that were taken after this date, along with any interest you were charged.

If you’ve paid with a credit card, you have additional protections under Section 75 of the Consumer Credit Act. You might be able to claim a refund from your card issuer if the payment arrangement goes wrong.

Recurring payments can affect your debit or credit card transactions as they could take you over your credit limit or leave you with insufficient money in your current account, potentially leading to overdraft fees. 

You might also find it difficult to cancel your credit card, as you’ll have an active payment set up on it. Credit cards typically remain open for a few months after you cancel them to ensure that there aren’t any unprocessed payments. If a retailer is still asking for recurring payments, this will count as a new incoming payment that you will need to settle before you can cancel your card.

Recurring payments can sometimes lead to unexpected debt. Find out how to pay off credit card debt here.

No, cancelling your credit card will not automatically stop recurring payments. This is because your credit card will remain active for a few months after any cancellation to ensure all payments are made. The best way to cancel a recurring payment is to contact your service provider. It can also be sensible to notify your bank or card issuer, as they may be able to block recurring payments or issue a card block to prevent further charges.

Ensuring that you’re not caught out by unexpected payments will help you to keep your finances healthy, but it’s also beneficial to grow your savings. At Raisin UK, you can apply for savings accounts from a range of partner banks in one place. Register for a Raisin UK Account to apply in a few clicks, view all your savings accounts, and easily fund accounts from different banks and building societies.