Direct Debits and standing orders

If you’ve ever forgotten to pay a bill, you know the hassle it creates. Direct Debits and standing orders change all that - they make sure your bills are paid automatically. 

Find out how and when to use them, what the costs are and how to sort out any problems.

Watch this video from the Money Advice Service - How to make payments using your bank account

The difference between Direct Debits and standing orders

  • Direct Debits give a company permission to take money from your bank account on an agreed date. They will need to notify you of a change to the amount or date. For example, you might use a Direct Debit to pay your gas and electricity bills.
  • Standing orders give the bank an instruction to pay an exact amount to another account regularly. For example, you might set up a standing order to pay your rent.

What is a Direct Debit?

When you set up a Direct Debit you tell your bank or building society to let an organisation take money from your account. 

Money fitness tip

Direct Debits are useful to pay regular bills like your utility bills when you're on deployment.  But make sure you have money in your account to pay them when they're due. 

  • The organisation can collect however much you owe them, but they have to tell you in advance (normally ten working days) how much they’ll take, when, and how often.

  • Direct Debits are handy for paying regular bills, such as gas or electricity, especially where the amount regularly changes.

What’s good about them?

√  Save time and effort.  No need to worry about remembering to pay a bill and no fines for paying late. 
 Save money. Lots of utility providers (like gas and electricity providers) give you a discount for paying by Direct Debit. 
√  Safe and secure. The bank will pay any incorrect payments back to you. 

Are there any disadvantages?

X  You need to stay in control. Keep track of your Direct Debits and make sure there is enough money to cover the payments - try setting yourself a reminder to check.  This is easy to do, especially if you have online access to your account. If not, you might end up being charged by your bank - see Do they cost anything below.

Money fitness tip

Make sure you cancel any Direct Debits for things you’re no longer using, eg gym membership or magazine subscription.

Who can use them?

How to set up a Direct Debit?

  • The organisation collecting the payments will tell you what to do. Usually you fill in a form and send it to them, or set it up online or over the phone. They’ll let your bank know.
  • You can cancel a Direct Debit at any time by contacting your bank and sometimes through online banking. 

Do they cost anything?

  • No – banks don’t charge you for making or setting up Direct Debits.
  • Watch out for refused payments! If you don’t have enough money in your account to cover a Direct Debit your bank can refuse to make the payment and might charge you - typically £5 to £25. Even if they do make the payment you might go into the red without noticing – which means you'll have to pay overdraft charges.
  • However, with the ‘retry process’ you have until 2pm - as a minimum - to pay funds into that account to cover the payment when it is ‘retried’ by your bank or building society later that same day. Many banks will try to contact you if a payment has failed, so you have time to put money in. If they don’t offer this consider switching to a provider who does. Find out more about the retry process.

Download a Direct Debit reminder app from the Bacs website to avoid refused payments and overdraft charges.

don't mix up..

...Direct Debits and standing orders with continuous payment authorities (CPAs). These let companies like payday lenders or certain subscription services take money they think you owe them, when they think they're owed it.

 

 

 

What if there’s a problem with a Direct Debit?

  • The Direct Debit Guarantee protects you. If the bank or the organisation collecting the Direct Debit makes a mistake (such as taking the wrong amount) you can get a refund from your bank.
  • If you have a problem with a Direct Debit, you should contact your bank.

What is a standing order?

When you set up a standing order you tell your bank or building society to make regular payments to a particular bank or building society account.
  • They’re different from Direct Debits. They pay exactly the amount you choose, not the amount you owe to an organisation.
  • You can set them up to keep on paying indefinitely, or to end on a certain date or after a set number of payments.
  • You’re in full control – you can start or stop them or change the payment amount whenever you want. 
  • Standing orders are useful for paying fixed costs, such as your rent.

What’s good about them?

 They’re useful where you can’t use a Direct Debit. For example, to make regular payments to a person, like your landlord. 
√  You can use them to move money between your own accounts. This might be useful if, for example, you want to pay a set amount each month into a savings account.

Who can use them?

How to set up a standing order?

  • With some banks and building societies, you can set them up online or over the phone.
  • You can complete a standing order form and give it to your bank. You’ll need the account number and sort code of the person you’re paying
  • You can cancel a standing order at any time, or change the amount, payment date. 

Do they cost anything?

  • No.  Banks don’t charge you for setting up standing orders.
  • Watch out for refused payments. If you don’t have enough money in your account to cover a standing order your bank can refuse to make the payment and might charge you - typically £5 to £25. Even if the bank does make the payment, you might go into the red without noticing – which means you'll have to pay overdraft charges.
  • The ‘retry process’ means you actually have until 2pm on the day - as a minimum - to pay money into that account to cover the payment when it is ‘retried’ by your bank or building society. Lots of providers will get in touch with you on the day if a payment has failed. This is so you have time to put money into your account. If your bank or building society doesn’t do this, think about switching to a provider who does. Find out more about the retry process.

How to avoid and sort out problems with standing orders

  • Regularly review your standing orders and cut back on service you no longer need.
  • Double check the bank account details you give, the amount and the payment date.
  • It's your responsibility to ensure the payment is for the right amount if it changes. For example, for a mortgage payment if the interest rates change.
  • If you have a problem with a standing order, contact your bank.

Last reviewed: 08/03/2019

This content has been provided by the Money Advice Service