New research has revealed that Brits waste a shocking £13.7 billion a year on direct debits for things we no longer have any need or use for. The major culprits for unnecessary direct debit payments include mobile phone contracts, utilities, insurance and gym membership.
How have we ended up wasting so much money
The research is from Moneysupermarket, which found that on average we pay £311 by direct debit every month - and a quarter of people spend £500 a month this way. There's no doubt it is a convenient way to avoid missing bill payments. Kevin Mountford, head of banking at MoneySuperMarket said: "Households face a huge number of outgoings which they may lose track of; an automatic payment can help to keep on top of managing bills and avoid the issue of missing payments and accruing charges and fines."
However, the downside is that millions of us have set up direct debits that we subsequently forgot about. The survey showed that half of direct debit users don't know exactly how many automatic payments they have set up.
Meanwhile, 7% of people admitted that they were paying for things they didn't need. This shoots up to almost one in five among 18-34-year-olds. On average, people who are paying unnecessary direct debits fork out £70 a month on them - so that collectively we're wasting a staggering £13.7 billion.
What are we wasting money on?One in five stated that they are handing over money for utility bills accidentally. It may seem strange for this to be top of the list of bills people shouldn't be paying - but when your account is in credit it's easy to see why topping it up still further seems like a waste of your hard-earned cash.
Second on the list was a needless mobile phone contract - paid for by 18%. This may be a case of being on the wrong contract - paying for too many minutes and texts and too much data. Or it could be that people are continuing to pay for a contract long after their handset was due for renewal - so they are effectively still paying for a handset they covered the cost of months earlier.
Third was insurance - which 16% of people say they are needlessly paying for. This may be insurance they have subsequently decided they do not need, or it may be a case of over-insurance.
How can it happen?The clue to the cause of this problem lies in the fact that we don't tend to think about direct debits - this is what makes them so effective for getting us to keep our financial commitments, but can also mean that we continue to pay them long after we should have stopped.
We may well check our statements to see how much is coming out of our accounts - some 57% of people say they do this every month. But it's quite another matter to actually take a step back and ask whether this is a sensible amount to be paying - and whether we need to keep this direct debit going at all.
Mountford warns: "Consumers must be proactive and manage their own finances to ensure they are not throwing money down the drain by paying direct debits they no longer use, especially at a time when many household finances are still under pressure. You should have a clear idea of what is coming in and going out of your account each month. You should also consider payments such as unused gym memberships or annual subscriptions, as this could shave excess pounds off your monthly outgoings."