Regular Saver-What happens if Direct Debit Payment Bounces

OceanSound · 18 November 2019 at 10:31AM

I have the following regular/monthly saver accounts:

a) Halifax
b) M&S
c) First Direct
d) Santander
e) HSBC

All of them are paid into each month using Direct Debit (DD) or Standing Order (SO). Each paying in date in programmed on my smartphone with a reminder set about 4 days prior, so I move sufficient funds to each respective current account to enable the DD or SO to process.

e.g. M&S Monthly saver deducts £250 on the 21st of each month from the M&S current account, so I move £250.00 from savings account (held elsewhere) to M&S current account on the 17th of each month.

Was wondering, what happens if I don't do this (due to missing the reminder on smartphone), and the SO payment bounces (due to lack of funds in the M&S current account)?

Do I receive any message (call/SMS/email), so I can deposit funds before the payment is retried? If I miss the time limit to deposit funds, can I do the payment manually?

Is there any fee/charge for the bounced payment? If yes, are the fees/charges the same for SO and DD?

Your experience with the above regular or monthly savers above specifically will be greatly appreciated, although other experiences relating to SO's or DD's and bounced payments when paying gas or electric bills for example would be useful.

p.s: The MSE website has an article about bounced payments from August 2014. It has details about whether the bank will contact us if this happens and if there is any fee/charge involved:

https://www.moneysavingexpert.com/news/2014/08/payment-bounced-youll-soon-have-a-second-chance-to-avoid-fees/

I don't know if the information of on that webpage still applies. For example, the halifax website says there are no additional fees apart from the small daily overdraft fee (no overdraft fee if overdrawn less than £6). I don't have an arranged overdraft with Halifax so imagine the payment will just be declined even if it's a small amount.

p.s.s: the hsbc current account has an overdraft of £1250, so, the DD/SO will definitely be processed, as long as I'm not close to the overdraft limit.

Willing2Learn · 18 November 2019 at 10:55AM

This is easily solved by setting up more SOs. For example, I set up a £250 SO to go from my main account (TSB) to my M&S current account. The date of the SO is 4 days before the M&S current account is due to drip-feed my M&S Monthly Saver. This way you do not need reminders on your smartphone.

18cc · 18 November 2019 at 11:08AM

Good advice from willing2learn - his is the way I used to do it back in the day when regular savers worth doing! just make sure you leave a couple of days between each standing order to allow for weekend processing etc as some banks do weekends differently

Bobblehat · 18 November 2019 at 11:14AM

I understand that you want people's experience of failed DD/SO's, but I thought this might interest you, especially post #15 …. (and BTW, the current interest rate is 1.41%) ……

https://forums.moneysavingexpert.com/showthread.php?t=6067573

Bobblehat · 18 November 2019 at 11:39AM

…. forgot to say, I also arrange each CA to have a balance just over double the amount of the SO feeding the RS on the day the SO leaves. So in the event of the feeder SO going into the CA failing, I have a month to sort the problem out and the CA would not have gone overdrawn when the RS SO leaves.

E.g. If the feeder SO (say £250 on the 15th) going in to the CA goes through (as normal) then my balance on the 18th is £505 and the RS SO of £250 goes out on the 19th … no problem. If the feeder SO to the CA fails, then the balance on the 18th would be £255 …. just enough for the RS SO on the 19th …. and a month to sort out the problem without going overdrawn.

OceanSound · 18 November 2019 at 4:11PM

Bobblehat wrote: »

.... If the feeder SO to the CA fails, then the balance on the 18th would be £255 …. just enough for the RS SO on the 19th …. and a month to sort out the problem without going overdrawn.

I suppose you could setup low balance alerts (SMS/email) on the CA (if the account has this feature - I know TSB, Santander, HSBC has this).

e.g. If balance of TSB acccount falls below £1500 send sms alert. IF balance of HSBC account falls below £250, send sms alert to warn, so you can check out what happened then top-up manually if necessary etc.

p.s. maybe even set the low balance alert as high as £505 for the HSBC case.

OceanSound · 3 December 2019 at 2:39PM

Bobblehat wrote: »

....
E.g. If the feeder SO (say £250 on the 15th) going in to the CA goes through (as normal) then my balance on the 18th is £505 and the RS SO of £250 goes out on the 19th … no problem....

Take it the 3 day gap (between 15th and 18th) is to account for weekends/bank holiday's? i.e. SO's aren't processed on weekends/bank holidays, so in the event of a bank holiday weekend, where your feeder SO payout falls on a Saturday, it will go out on Tuesday in to your CA and CA will still have double the funds to cover RS SO.

Bobblehat · 4 December 2019 at 12:37PM

OceanSound wrote: »

Take it the 3 day gap (between 15th and 18th) is to account for weekends/bank holiday's? i.e. SO's aren't processed on weekends/bank holidays, so in the event of a bank holiday weekend, where your feeder SO payout falls on a Saturday, it will go out on Tuesday in to your CA and CA will still have double the funds to cover RS SO.

That's it

colsten · 4 December 2019 at 7:40PM

OceanSound wrote: »

All of them are paid into each month using Direct Debit (DD) or Standing Order (SO).

I have the same RS accounts but none of mine accept deposits by DD. How did you manage to set up DDs for yours?

OceanSound wrote: »

.....
Was wondering, what happens if I don't do this (due to missing the reminder on smartphone), and the SO payment bounces (due to lack of funds in the M&S current account)?

I have an agreed overdraft facility for those feeder accounts which might not have sufficient balance to pay for the RS SO.

OceanSound wrote: »

Do I receive any message (call/SMS/email), so I can deposit funds before the payment is retried?

May be, may be not. Ask your bank / check your T&Cs.

OceanSound wrote: »

If I miss the time limit to deposit funds, can I do the payment manually?

Not on those accounts that demand deposits via SO.

OceanSound wrote: »

Is there any fee/charge for the bounced payment? If yes, are the fees/charges the same for SO and DD?

You risk an unpaid SO, or an unarranged overdraft, charge. I don't think you'd get a charge for an unpaid DD as none of your accounts accepts deposits by DD.

OceanSound wrote: »

I don't have an arranged overdraft with Halifax so imagine the payment will just be declined even if it's a small amount.

this might be an incorrect assumption

OceanSound wrote: »

p.s.s: the hsbc current account has an overdraft of £1250, so, the DD/SO will definitely be processed, as long as I'm not close to the overdraft limit.

the SO might even proceed if it would put you over your agreed overdraft limit.

colsten · 4 December 2019 at 7:45PM

OceanSound wrote: »

I suppose you could setup low balance alerts (SMS/email) on the CA (if the account has this feature - I know TSB, Santander, HSBC has this).

e.g. If balance of TSB acccount falls below £1500 send sms alert. IF balance of HSBC account falls below £250, send sms alert to warn, so you can check out what happened then top-up manually if necessary etc.

p.s. maybe even set the low balance alert as high as £505 for the HSBC case.

The trouble with low balance alerts is that they don't necessarily get sent in time.

OceanSound · 8 December 2019 at 6:44AM

colsten wrote: »

I have the same RS accounts but none of mine accept deposits by DD. How did you manage to set up DDs for yours?
.....

They are all SO's.

Regular Saver-What happens if Direct Debit Payment Bounces

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