A continuous payment authority (CPA) is a type of recurring payment that is set up on a customer’s card giving a vendor or merchant permission to withdraw a set amount of money in installments. The money will be taken from the selected credit or debit card whenever cash is owed to the vendor. A continuous payment authority will often be set up when you borrow money online and need to arrange repayment terms with a lender as well as when you take out subscriptions for magazines or streaming services, or even month-to-month services such as gym memberships.
The term ‘continuous payment authority’ refers to the process of automatic billing that happens on a global scale. Once your credit or debit card details have been given to a company or lender or service provider, these details are stored, and then will be used on a reoccurring date. Here is a rundown of the ins and out of continuous payment authority.
What is The Difference Between a Continuous Payment Authority, Direct Debit and a Standing Order?
A continuous payment authority differs from a direct debit or standing order as these are funds taken or sent directly from your bank account. With a CPA, payments are taken from your card and are processed by the card network, such as Mastercard or Visa. When it comes to loans, you may for example borrow $500 and agree payment terms with the lender over a few months. Each month, as the lender will have the authority to take continuous payments, the amount due will automatically come out of your account.
A direct debit takes a couple of days to set up and is sorted by handing over a code and account number; you will then be the one to specify a regular amount and day of the month. A direct debit or standing order are instructions made by you to your bank, not a company or lender to you.
A CPA can be set up immediately on a debit or credit card with just the 16-digit number. The company or lender will then tell you what they’ll take from your account and when.
Other differences include that if a direct debit fails to go through you may have to pay a penalty fee to your bank. This isn’t necessarily the case for a CPA. Also, direct debits are linked via a debit card, to your bank account in a slightly different manner, whereas a CPA gives the lender or service provider limited access to your account to take the scheduled payments.
What are Continuous Payments Used For?
Continuous payments are most commonly used for things such as magazine or site subscriptions and memberships as well as payday and even bad credit loans. However, there are some other common uses associated with these payments.
Some debt collection agencies also use continuous payment authority due to the ease it affords them when collecting a borrower’s repayment. A primary example of this is in the reoccurring payments used when borrowing payday loans.
Continuous Payment Authority and Payday Loans
Continuous Payment Authority is a popular method of repaying payday loans. This is because the speed and ease of this set-up is handy for these short-term loan models, and it suits lenders to have the authority it affords them. This way, lenders can easily collect their repayments from you without needing to ask or chase you up on your repayments.
Although in some states there may be some regulations in place, you should still be sure to check the validity of your payday lender prior to taking out a payday or other short-term installment loan. You may do this by, for example, checking the reviews for the payday lender and regulations in your state. In some states, like Texas and Florida, the laws around payday loans and short term lending are more relaxed compared to some other states, which may influence the degree of flexibility available when it comes to repayment terms.
Can I Stop a Continuous Payment Authority?
You can cancel a continuous payment authority by contacting either the company that is taking the payment or your bank.
However, be sure to check the deadline to cancel a continuous payment authority. For example, it may be the case that you will need to cancel your recurring payment on the working day before the next payment is due. For example, if you’re next payment is due on Monday, you will need to have cancelled it by the previous Friday. This will give the company time to receive and act on your cancellation request. If you try to cancel the payment on the same day that it is due, it is unlikely that a refund will be issued.
Problems may occur if the creditor continues to use the credit card details you have provided for future payments without your permission and after you have cancelled your subscription. If this is the case, these payments are considered to be unauthorized and you should inform both the company and your bank. This should result in a complete refund of any unauthorized payments back into your account.
What to Remember with Continuous Payment Authority
If you cannot afford to make the reoccurring payments you have set up, you must be sure to cancel the CPA in good time (at least the previous working day) as missing payments may be a sign of financial problems.
You must also ensure that you do not unnecessarily subscribe to places that require continuous payments, for example, if you are short on cash, it may be more financially responsible not to subscribe to multiple magazines or streaming sites.
If you are using continuous payments to repay a payday loan, it is also important that you do not miss your payments as this may be a sign of a debt problem. This may cause you to roll over your loan and pay added interest, so it is important that you consider in good time that you can make your next reoccurring payment.