If you have ever accidentally forgotten to pay a bill, you will be well aware of all the hassle and pain it can cause. With direct debits, this need never happen again – direct debits are automatic payments which can help ensure that your bills are always paid in full and on time. Direct debits are especially useful for smaller businesses who want to ensure they get paid on time and there are a number of direct debit services out there which can help with just that.
#1: Direct Debits vs Standing Orders
A direct debit allows a company permission to debit money from your bank account on an agreed date, recurring each month. The amount you agree to will be taken at the same time each month, and any proposed changes in the date of the direct debit, its frequency, or the amount taken must be notified to you well in advance.
A standing order is different but works in the same way. With a standing order, you give your bank express permission to pay an amount to another account on a specified date or frequency. For example, you could create a standing order to pay your rent to your landlord’s account each month.
#2: Direct Debit Advantages and Disadvantages
The best thing about direct debits is that they save you lots of time and effort; you no longer need to keep track of when each payment is due each month and then manually send the money. Instead, the direct debit takes care of all that – you just need to ensure that there is enough money in your account to clear the payment. Direct debits can also help you save money; many gas and electricity companies will provide a discount for paying by direct debit because they know they won’t have to spend time chasing you up for your payment.
There is only one major disadvantage to direct debit and that’s the fact you will need to stay in control and ensure that there is always enough money to pay your direct debits each month. If you have a lot of direct debits, this can get very difficult to manage, but it is a lot easier if you have access to internet banking. Luckily, most businesses who accept direct debits will ask you which day you prefer the payment to go out. So, for example, you could choose to have all of your direct debits taken out on the first of the month, or you could choose to spread them out over the month.
#3: Do Direct Debits Cost Money?
For customers who are having a direct debit set up from their account, banks will not charge anything. If you miss a payment and your direct debit bounces back, you could be liable to pay some hefty bank charges, which is why it is imperative that you ensure there is always enough money in your account to pay the direct debit on time.
For companies taking the direct debit, there are charges associated with them and this depends on the service provider you are using.
#4: What Happens When Things Go Wrong?
It is very rare that a problem will occur with a direct debit payment, although on rare occasions, issues may arise. If you find that a payment has been taken out of your account that you didn’t authorise, your first step is to contact the organisation. If they are unable to sort the issue, your next step is to contact your bank. Usually one of the above will be able to resolve the problem quickly, however, if this doesn’t happen, you can make a complaint to the Financial Ombudsman Service who will take a look at your contract with the organisation and determine whether the payment was fair or not.
Direct debits are a convenient and simple way to have your monthly payments collected from your account automatically and with minimal fuss, eliminating the need for you to keep track of payments and send the money manually. For companies, they, again, are a convenient way to ensure that you always get paid on time and do not need to chase clients and customers for your money.