There are several financial instruments in the UK banking market that are designed to help customers deal with their financial problem better. One of the most relatively unknown ones among the lot is a Continuous Payment Authority better known as a CPA. A CPA can have a major impact on the state of your bank account and is therefore considered an important part of the UK banking industry.
Unfortunately, many customers know very little about it. This article takes a look at what Continuous Payment Authority is, how it works and whether you should set one up or not.
What is a Continuous Payment Authority?
A CPA is simple to understand. It is basically a type of automatic payment that can be made regularly. These can be set up using credit cards or debit cards. The authority is connected to the bank account that the credit or debit card belongs to. Typically business organizations, etc. make use of this payment method to make regular payments that are due each month. Unfortunately, for the general customer, CPA is similar to a direct debit or a standing order which can often mean they tend to confuse their rights.
How does it Work?
By setting up a CPA, the customer is allowing the business the charge its customers for their services using the credit/debit card information that they have provided. This means that business will not have to get each payment from the customer authorized; they can simply charge the customer for their set regular payments without asking. The most common uses of CPAs are to pay for:
- Broadband and mobile services
- Online Dating Apps
- Retainer Fees for Lawyers
- Gym Memberships
- Magazine Subscriptions
A CPA is unlike a direct debit, because unlike the latter, the former can take payments any day.
Should You Set Up a CPA?
Having looked at what a CPA does, the question is whether or not a CPA is right for you. The first question to keep in your mind before taking this decision is whether or not you are availing services that could make use of a CPA? If you are using a Broadband or have a gym membership, you are well within your right to set up a CPA. The second pressing question is do you think you can trust your service provider and the gym administration to not make false withdrawals in the name of payments? This is an important area of concern.
A CPA is allowing business a carte blanche to make any payments that they deem necessary at any time without the need for prior authorization. For genuine business this would only represent a chance to make regular timely payment withdrawals but for fraudsters it could mean a chance to con unsuspecting customers out of their cash.
Once you have decided on that part, you need to attend to the final and most pressing question. Does your account have a regular source of income that can allow CPA to properly function? If the account has money saved up and no new additions, with time it would be drained of cash.
These are some of things that customer need to make sure if they are to set up a CPA.