Answers about Pre-Authorized Credit Card Payments

I closed my credit card account, but the bank continued to accept pre-authorized withdrawals (such as charges from my insurance company). Why won’t the bank stop accepting these charges?

Generally, your account agreement advises that you must cancel all agreements for pre-charges by merchants prior to closing an account.

In many cases, the bank does not cancel these for a simple reason: the pre-authorized withdrawal agreement was made between the consumer and the merchant making the charges. Since the bank is not a party to the agreement, it cannot cancel it. Therefore, the withdrawals can be charged to the account even after the consumer has closed it.

You can stop the bank from paying a single pre-authorized charge by contacting it in writing or orally at least three business days before the pre-authorized charge will be made.  However, this may not cancel your agreement for ongoing pre-authorized charges with the merchant.  The bank can require you to submit written confirmation that you have cancelled the agreement with the merchant within 14 days of your contact with the bank telling it not to pay the pre-authorized charge.  If you do not provide the bank with written confirmation, it may honor any following pre-authorized charges by the merchant.

March 2010