In simple terms, a Direct Debit is a request from you to your bank, that authorises someone to collect a payment from your account when it’s due. You give permission for this to happen by completing something called a Direct Debit Mandate, either online or via a paper form. This then allows the organisation that requires payment from you to automatically take the relevant payments from your account.
You can use a Direct Debit to pay for pretty much any payments, but they’re mostly used to pay for:
- Fixed payments for memberships or subscriptions – Using a direct debit is the safest and most efficient way of making recurrent payments for things like gym memberships or subscriptions like Amazon Prime or Netflix.
- Regular bills – By using a Direct Debit you can be assured that all of your important bills like your gas/electricity/council tax will be paid on time each month.
You can also use Direct Debit to make one off payments. It isn’t always suitable, such as in situations where instant funds are required, but if the organisation you’re paying doesn’t need the money immediately then Direct Debit can be a good option.
Paying using Direct Debit really does offer significant benefits to consumers. They are convenient – payments are automatic, so you’ll never have to remember to make your important payments once they’ve been set up, you can relax in the knowledge it’s all being done for you. They also offer great customer protection – Direct Debit is the safest payment method in the UK. The Direct Debit Guarantee gives you the right to an immediate refund for any payments that shouldn’t have been taken. There are also certain scheme rules that organisations must adhere to before they can take payments.
Direct Debits offer more flexibility than other ways to make regular payments, such as Standing Orders. Standing Orders can be a good way of making regular payments of a fixed amount, however if you need to pay variable amounts or change the payment amount then they aren’t the most practical option. Understandably, people often confuse Direct Debits and standing orders. The main difference is that while a Direct Debit is an authorisation for an organisation to take money from your account, a standing order is an instruction from you to your bank to make payments to a person or organisation. Another significant difference between the two forms of payments is that a standing order offers no consumer protection – once you pay, you aren’t guaranteed a refund if the payment was incorrect.
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