We look at some common problems with direct debits and explain how to solve them.

The wrong amounts being debited ... businesses continuing to direct-debit an account after their service has been cancelled ... consumers being charged dishonour fees for not having enough in their account to cover the debit.

Problems with direct debits are easier to solve than many people think. You have the right to end a direct debit at any time - by telling the bank and the business (the "initiator") that's taking the money from your account. It's preferable to give written notice but not essential if you need to cancel it urgently. But you still need to keep a close eye on your bank statements to make sure it's all happening as it should.

Some tips for managing a direct debit:

• When a membership expires, stop the payments yourself rather than relying on the initiator to cancel the direct debit.
  
  
• If a mistake's been made, stop the direct debit and make manual payments until the problem is sorted.
  
  
• Things can go badly unstuck if there's not enough money in your account to cover the debit. If your account is overdrawn, or you're exceeding your overdraft limit, many banks will let the debit go through and then impose an honour fee ($25 to $30). Others may not allow the debit and charge a dishonour fee. These fees of course put you further into overdraft - and subsequent payments will be hit with a fresh fee. But don't wait for this to happen: stop all your direct debits and make arrangements to pay manually until your balance has built up again.

Automatic payment or direct debit?

Direct debits are convenient for paying bills - and most businesses prefer them. But you can also pay by automatic payment. What's the difference?

Direct debits authorise an organisation to deduct money from your account at regular intervals. They're good for regular payments where the amount varies (such as your phone, rates or power).

Automatic payments give you greater control over your money. You arrange for your bank to make regular fixed payments; the business you're paying has no access to your account. So this system's good for payments that don't change from month to month (such as a gym membership or a Christmas hamper). It's also an easy way to save - you can set up a payment to go into a savings account on pay day.

Banks usually charge a small fee, around $5, to set up an automatic payment. There may be a similar charge to load a direct debit but the initiator may have arranged for this not to be charged to you.

Your bank may also charge a fee of 30 to 50 cents each time an automatic payment or direct debit is taken from your account, although both are usually free for accounts that have a monthly administration fee.

More information

• Ministry of Consumer Affairs: www.consumeraffairs.govt.nz
• The Banking Ombudsman: www.bankombudsman.org.nz (0800 805 950)

More from consumer.org.nz

• Bank fees database - for details of direct debit and automatic payment establishment, alteration and transaction fees.

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