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What is a Direct Debit?

A Direct Debit is an instruction from a customer to their bank or building society authorising an organisation to collect varying amounts from their account, as long as the customer has been given advance notice of the collection amounts and dates. This can be used to ensure regular, safe and efficient payments of anything from household bills to charitable donations.

This definition contains a number of important pieces of information which are key to Direct Debit:

1. Collection is by the Service User.  The process of collecting the money is initiated and managed by the organisation who wishes to receive payment.  It is not a process managed by the person paying the bill.

2. The Direct Debit can cover varying financial amounts and dates, unlike a Standing Order which covers a specified amount.

3. Not all Bank and Building Society accounts support the collection of Direct Debits.

4. The owner of the Bank / Building Society account must have given approval to the Service User to collect the payment by signing of a Direct Debit Instruction

5. The process is covered by the Direct Debit Guarantee which is offered by the Banks / Building Societies to the owners of the Bank / Building Society account.

So what is the difference between a Direct Debit and a Standing Order?

A standing order is for a fixed amount on a fixed date.  Direct Debits are completely flexible and can be for variable dates and amounts.

  • A standing order is originated (pushed) from the payer’s bank.  A Direct Debit is originated (Pulled) from the organisation collecting the money.
  • A Direct Debit payment is fully protected by the Direct Debit Guarantee.  A standing order does not offer this protection.

If you have questions about Direct debits, please contact us to discuss.

 

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