What Is Direct Debit and How Does Direct Debit Work?

Direct debit is a method to pay regular bills from your current account. To use a direct debit you have to fill a Direct Debit Mandate form available in the bank. Direct Debit can be used like a credit card to make payments online and offline. To pay utility bills and vehicle loans you can set up a particular date of each month, quarter or year on the direct debit form. This will help to pay bills on time. Money is taken directly from the bank account by the company to whom you want to pay, according to the instruction provided.

What is the difference between a direct debit and a standing order?

One of the main differences with a direct debit and a standing order is that the company can make changes in the amount or date they wanted to take it in the direct debit by informing the payer about it in advance. All direct debit providers give this notification facility. Direct Debit Portal provides you more information about this.

What has to done if there is no enough money in the bank account?

There will be circumstances where there will be insufficient funds in your account to pay a direct debit. In such cases the banks will give a provision where current account will get a buffer zone. This is a small amount that you can use without paying any interest. The amount will vary depending on the type of account. If you exceed the buffer zone amount, then your bank or the private direct debit provider will not take charge to pay the money. If you are running on negative balance, then there are chances for additional charges for using the payment method.

If you know in advance about insufficiency in your account, then it is better to arrange a temporary overdraft with your bank to pay the direct debit. You can also use alternative payment methods or can negotiate with the payee to arrange for a later payment date. It is a good practise to change payment dates or paying with an alternative method, if you don’t have enough credit balance in your account. This avoids additional charges or penalties. To get more details about direct debit you can log on to Direct Debit portal.

Do you want to cancel direct debit?

You can cancel a direct debit whenever you want. There are no restrictions for this. But make sure that you have cleared your bills and other payments before you cancel it. Because cancelling direct debit before clearing the bills can force you to pay fees or penalties for non-payment of the bills. By paying bills incorrectly can affect your credit rate. Anyone who won’t pay bills before due date will have negative credit rating. Direct Debit portal provides you more details about cancellation of direct debit.

What is direct debit guarantee scheme?

If a bank or a direct debit giving company wrongly deducts any amount from a customer’s account, then it will be credited back without any delay. The guarantee scheme says that, “if there is a change in the amount to be paid or the payment date, the person receiving the payment (the originator) must notify the customer in advance. If the originator or the bank/building society makes an error, the customer is guaranteed a full and immediate refund of the amount paid. Customers can cancel a direct debit at any time by writing to their bank or building society.”