WHAT'S the difference between direct debits and regular payments from a debit or credit card?

If you don't know, BEWARE! You could end up with payments you've NO RIGHT TO CANCEL.

It's like handing your wallet to a shop and saying: "Help yourself."

So if you've ever set up a regular payment using your card's long number rather than your bank account details, watch out.

These AREN'T direct debits, they're a menace technically called recurring payments and only the company you're paying can cancel them.

And getting that done can be some task - my mailbag's filled with horror stories.

So as there's no sign of these abominable rules being changed, you need know how to spot them and fight your way out.

THREE TYPES OF PAYMENT

Many wrongly assume all monthly payments to companies are Direct Debits. Yet there are three regular payment types:

DIRECT DEBITS: This agreement between you and your bank allows the bank to let a company regularly take fixed or varying sums from your account.

The often mentioned but rarely read Direct Debit Guarantee gives you rights to contact your bank and cancel anytime - and your bank, not the company, must repay errors.

STANDING ORDERS: You instruct your bank to regularly pay fixed amounts to someone else's account. You can cancel any time.

RECURRING PAYMENTS: The company asks for the long number across your credit/debit card instead of bank details.

And this can be the start of a nightmare. While money comes out regularly, each payment is a SEPARATE transaction so there's no easy off-switch at your bank.

The company is registering a charge on your card, and if it wants to keep charging it can.

Hopefully, reputable companies will simply stop filching money when asked. Yet issues galore crop up. The firm may say you're stuck in a contract or, as happened to some customers at now-defunct Setanta Sports, you can't contact it to cancel.

Of course, things get worse if it's a shady outfit or little-known offshore company, where you've less legal recourse.

Speaking frankly, one of the biggest danger zones is pornography websites which often use recurring payments. They exploit the embarrassment factor which stops people complaining, leaving them rich pickings.

HOW TO SPOT HIDDEN RECURRING PAYMENTS

If you're unsure whether you've set any up in the past, here's how to identify them.

If you bank online you can usually click for a list of Standing Orders and Direct Debits. Any regular payments left are recurring payments.

For walk-in branch users staff can tell you which is which.

If you have a credit card ANY regular payment made from this is, by definition, a recurring payment.

HOW TO DITCH THE RECURRING ITCH

Recurring payments are best avoided if possible.

If the company you are dealing with is a member of the Direct Debit scheme, try switching to this instead.

Many smaller companies once unable to offer it have now signed up.

Can you pay manually? Will the company allow you to make a manual payment each month, or even a standing order? It's safer but a hassle, so if you're only paying pennies anyway, the risk of sticking with the recurring payment is less.

Finally, you can try using prepay cards. With this new type of plastic, you load cash pre-spending.

It's untested, but it could be a safer way to have recurring payments for less reputable companies, as you just keep cash as and when you need it on the card.

For the cheapest cards, go to www.moneysavingexpert.com/prepaid

HOW TO CANCEL IT

THIS depends on the company's attitude. Follow these steps:

1 - CONTACT the firm. Most legit companies will stop payments when asked, although if you're mid-contract - like a 12-month digital TV deal for instance - they may refuse. In this case, weigh up further action as breach of contract could leave you indebted.

2 - TELL them you dispute the payments. If they won't play ball, officially dispute the transactions in writing.

3 - CALL the credit/debit card company. Inform the bank, saying you dispute these "unauthorised transactions". Under the Banking Code, it's their responsibility to sort it - which can mean they need to access the Visa, Mastercard or American Express (the company behind electronic payments) dispute processes.

4 - COMPLAIN to the free Financial Ombudsman. If all else fails, the Ombudsman can and order compensation, see www.moneysavingexpert. com/financialombudsman.

CAN'T I JUST CANCEL MY CARD?

This may work, but it's not always successful. When you cancel credit cards, the account remains open for several months to ensure all outstanding payments are processed. So any new Recurring Payment requests could count as a new payment coming in, and the card company could ask you to settle it. Better to dispute the transaction with your card company, knowing the issue's fully dealt with.

TV Money Guru Martin Lewis is the creator of the consumer revenge website www.MoneySavingExpert.com which is packed with info on how to get more money in your pocket.

• Get a corking rate of interest

This article has 3 comments