Authorising third parties to take cash from your debit or credit card can be really draining

At the same time, credit-card companies have seen an explosion of fraudulent transactions using this method, with organised criminals taking small sums regularly in a bid to avoid detection.

Most consumers use some form of automatic payments from a current or credit card account to make sure bills, such as mortgages, rentals, subscriptions, and payment for utilities, are paid on time.

Traditionally, standing orders were used by customers to instruct banks to make a regular fixed payment at a certain date. No-one but the customer, or the bank on instruction, could set up, alter or end these arrangements.

But standing orders were not very flexible, and so direct debits were introduced, to give suppliers, such as a gas or electricity companies, the power to instruct the bank on your behalf to give them a variable amount of money from your account to cover payments.

Companies like direct debits because they give certainty of payment, and many will offer discounts to customers who pay in this way. However, handing power to a third party to take money out of your account seemed a high risk move when they were first introduced in the 1970s, so safeguards were provided to give the public peace of mind.

If a mistake is made either by the retailer or the bank, and money is removed from your account erroneously, consumers are covered by a guarantee of an immediate "no quibble" refund from the bank. Customers remain in control in that they can stop payment altogether.

But direct debits and standing orders can only be used with a bank account, and they require you to have the cash in the bank or an agreed overdraft facility to cover the transaction.

Not everyone is always in such a position. "Recurrent" or "continuous" transactions were developed as a way of encouraging consumers into purchases by allowing them to spread the cost over a period of time, by making small regular payments. Furthermore, transaction are linked to a credit or debit card, allowing customers to buy using borrowed money.

With these arrangements, however, all control rests with the retailer. Once signed up, customers can feel powerless to extract themselves, and are forced to watch helplessly as money disappears from their accounts. Most people are completely unaware of how vulnerable they are, until something goes wrong. In many cases they are completely unaware what they have agreed to, believing they have signed up for a direct debit, which they can cancel at will, or a one-off payment.

Unlike a direct debit, a "continuous-payment authority" can only be cancelled by the business that holds it. Once signed, neither the bank nor the customer can intervene, and there is no bank guarantee of immediate money back if something goes wrong.

One key to understanding what you are letting yourself in for is the information you are required to give. If a firm merely asks for your bank account sort code and account number then it will be a direct debit. However, if it requires the much longer credit card or debit card digits, then it will almost certainly be a recurring transaction.

Another big problem with these transactions is that they frequently relate to online or telephone transaction where there is little if any paperwork to establish precisely what the customer believed he or she was signing up to. This can leave card-holders particularly vulnerable, not least because further contact is either prohibitively difficult, if e-mails go unanswered, or eyewateringly expensive, as you can only speak to many of these firms using premium rate telephone lines.

New regulations covering payment transactions have given slightly more robust protection against abuses, where customers can prove they have suffered serious injustice, though such instances may be limited.

Essentially, if a retailer or other service company erroneously charges you for continuous transactions then, under the new rules, they have engaged in an "unauthorised transaction". In this case, your credit card company has a duty to respond to any complaint from you by withholding further payments and refunding money you claim was withdrawn in error. Unfortunately, some card providers are better than others at acting on complaints.

However, where you have unwittingly signed up to an agreement which allows an organisation to take payments for say 12 months or longer, they are entitled to these payments. Your only option is to seek to negotiate an exit from the contract, which may not be easy or even possible.

UK Cards Association spokeswoman Sandra Quinn says: "Our advice is not to sign up to recurring transactions if you have a choice, because the investor protection is not great.

"If a firm makes unauthorised withdrawals from your account, then you can ask your credit-card company for help in sorting it out. But if you have signed an agreement which permits them to take this money, then you have to sort it out with the retailer yourself. And this can be very difficult."

The Financial Ombudsman, which is seeing a growing number of complaints about continuous payments, says part of the problem is that underlying the arrangements for continuous payment authorities are agreements between the banks and the card networks, which completely sidestep the customer.

Spokeswoman Emma Parker said: "These contractual arrangements will be binding on those who are party to them. However, that does not include the consumer, who will have no knowledge of the agreement and will not have signed up to it."

The Ombudsman finds itself uncomfortable with some of these arrangements and recently found in favour of one complainant, who had started up in business and ordered some business cards for 9.99 from online supplier, BG Ltd.

Several months later, while checking through his bank statements, he noticed that regular monthly payments of 9.99 were being made to two separate businesses he had never had any dealings with but believed them to be associates of BG Ltd. By this time he was 139.30 out of pocket.

The Ombudsman ordered the bank to refund the customer and pay him 100 for the inconvenience caused, as he could prove that he had never been party to any agreement with these other companies.

Case Study: Monthly withdrawals that went on for years

MIKE Hendry was driven to distraction after trying for two years to stop Tiscali taking 4.89 a month via what he thought was a direct debit.

Aberdeenshire-based Hendry found it impossible to get a response from the company and what annoyed him more was he had to use premium rate phone numbers each time he tried to sort the problem out, and was held waiting on lines costing him 50p per minute.

"I began the process of disentangling myself from Tiscali's dial-up service in May of 2007," says Hendry. "I phoned their helpline – charged at 50p per minute – and was given a cancellation code. I waited for the direct debit to disappear from my statements, but they never did. I repeatedly phoned and sent e-mails but nothing happened.

"I wrote to Barclaycard instructing them to stop the payment. They advised me to write to again with an accompanying letter addressed to Tiscali's bankers, requesting the payment be stopped and confirming I had no wish to use their services."

Hendry did this but nothing happened until he contacted Scotland on Sunday, by which time he reckoned he had overpaid Tiscali by 160. Within 24 hours of our contacting the company, he received a phone call offering him 200 to settle the matter.

Almost certainly Hendry had not signed up for a direct debit but a recurring or continuous payment, without realising. He admitted he would not know the difference between the two.

Tiscali has now been taken over by Talk Talk and a spokeswoman said: "We're sorry to hear about the problems Mr Hendry has experienced. We have now cancelled his account and refunded the funds taken in error."