How to stop cash from leaking out of your current account - Sarah Coles

It’s easy to sign up, and then forget all about these things, so you don’t really notice the money leaking out of your account, and don’t consider whether you’re getting anything out of it.

We started looking into common direct debit mistakes, and we got quite a shock. We thought that given how much pressure our finances are under, most people wouldn’t have extraneous direct debits at the moment.

We also assumed that after the initial novelty wore off, people would start to regret the cash they were haemorrhaging each month on fancy gins or a specially curated selection of pork scratchings. In both cases we were wrong.

In fact, an awful lot of us have monthly subscriptions that other people might regard as luxuries. The most common was video streaming like Netflix or Disney+, which 30% of us have, followed by music streaming, used by 17% of people. Next in line were gym memberships at 13%.

The more esoteric subscriptions also put in a decent showing, with at least 3% of people owning up to each of book subscriptions, meal kits, skincare, beauty subscriptions and vegetable boxes.

We then asked people how much value they got from these direct debits, and the results were even more surprising. Almost everyone with video streaming services and music streaming services said they got something out of the subscription, with video streaming clocking up the highest number of satisfied customers – at 98%. Music streaming services were in joint second place, alongside fruit and vegetable boxes, at 96%.

Gym memberships, notorious for going unused, were valued by nine in ten people who had them. The lowest levels of satisfaction were for flower deliveries – which 75% of people still said they got something out of and diet services at 79%.

On the basis of these results, it would mean virtually nobody cancelling anything, so we need to think differently about our direct debits and ask ourselves three questions that could be a more effective way of eliminating costs.

1. Exactly how much am I getting out of this?

In all cases we asked people to define whether they got a lot or a little out of their direct debit, and some subscriptions were underwhelming. Notably 55% of those who signed up to repair services said they got something out of them, but not much, and another 16% said they got nothing at all. 51% with a packaged bank account got a little out of it, and 9% got nothing.

Consider whether you’re getting full value from your subscription, and whether it’s worth everything you’re paying for it. A classic example here is a packaged bank account, which we often get into assuming everything will be a useful benefit, and then end up using very little. If you’re paying almost £200 a year for an account, and only benefiting from travel insurance for a fortnight in the summer, you’re far better off with free banking and a separate insurance policy.

2. Is this the best possible way to buy this?

Often it’s not the cheapest way to buy something. Vegetable boxes, for example, may come direct from farms and without plastic wrapping, but you often pay a premium for it. In many instances, vegetables will be seasonal, which in theory is great for the planet, but not if you’ve had a cabbage every week all winter. It’s one reason why 38% of people say they don’t get full value from their vegetable box subscription.

And sometimes you’re paying for a membership, when you’re using it so little that you’d be better off paying as you go. The gym often falls into this category.

3. Do I really need it – compared to other things?

The other risk is you’re paying for it automatically, so you don’t subject it to the same scrutiny as other elements of your spending. Asking whether you’re enjoying your monthly flower delivery isn’t enough. You need to put it side-by-side with the cost cutting efforts you’re making with the weekly shop, and ask whether you’d rather give up the flowers to have more to spend on groceries.

The aim here isn’t to give up everything you love. Instead, the objective is to free up cash on things you don’t really value, so you can spend more on those things you do.

Sarah Coles is a personal finance analyst at Hargreaves Lansdown