Debit cards and direct debits

Debit cards

A debit card lets you purchase something using your own money. You can use the card at the point of purchase anywhere that accepts credit cards, including telephone and the internet.

Some of the benefits of a debit card include:

• convenience
• no transaction fees
• no need to carry large amounts of cash
• reduces the number of ATM transactions you make
• using your own money saves paying interest charges you might incur if using a credit card.

Direct debit

A direct debit is when a periodic payment is directly debited from a transaction account or charged to your credit card. This is a convenient way to pay your bills or a monthly memberships.

Visit Moneysmart to learn more about direct debits.

Operating a direct debit facility

You should read the agreement carefully before entering into a direct debit arrangement. If you do not have enough funds to meet the scheduled payment, you may be charged a dishonour fee. You should monitor the payments being deducted from your account, or charged to your credit card, and be prompt to cancel the authority when you no longer need the service.

Cancelling a direct debit facility

In most cases you can cancel a direct debit authority at any time. If a contract with a business says that payment must be made by direct debit, you should speak with a solicitor before revoking your authority. For direct debits that are linked to your savings or cheque account, you should write to the bank where your account is held. If you instruct your bank to cancel the direct debit, they must make sure that no more payments under the direct debit authority are debited from your account. To cancel a direct debit on your credit card, you must write a letter to the trader and send a copy of that letter to your financial institution.

Maintaining direct debit payments

Be aware that if you cancel a direct debit payment, you are still legally bound to pay the business for services or goods already provided to you. If you stop making payments, you may incur default penalties under the terms and conditions of your contract.

Contact the Australian Financial Complaints Authority on 1300 565 562 or visit their website for more information.

Making a complaint about unauthorised debits

If you want to lodge a complaint about an unauthorised or irregular direct debit, the Australian Bankers Association Code of Banking Practice states your bank must promptly process the complaint. You will not be asked to first sort out the matter with the supplier.