Direct debit is the easiest, fastest, and most convenient method of making recurring payments. Because of this, it is used for payments like council tax and energy bills. Many people are also confused about what direct debit is and when it should be used. If you want to set up a recurring payment, read this guide to learn about direct debit and direct debit companies and if it’s right for you.
A direct debit authorises someone to withdraw funds from your account when they are due. This authorisation is granted by completing a direct debit mandate form, a paper form or an online web page. Once approved, the organisation can automatically deduct payments from your account (provided that they comply with the scheme rules).
Direct debit can be used to make almost any payment, but it is most commonly used to make the following:
Regular Variable-Amount Bills
With direct debit, you can rest assured that all of your essential bills will be paid on time each month. Direct debit payments for energy bills and council taxes totalled 2.4 billion in 2011.
Memberships or Fixed Subscriptions
Direct debit is the most secure and convenient method of making regular payments, such as magazine subscriptions or gym memberships.
Some businesses will offer direct debit to spread the expenses or pay on account.
By automating payments via direct debit, you reduce the likelihood of late payments or payment errors. You can save time by not having to process the payment each month manually or however often you make it.
Although direct debit is most often associated with monthly payments, it may also be used for one-time expenses. But, it cannot be used for one-time purchases requiring immediate transfer of money, such as e-commerce. On the other hand, direct debit may be a perfect choice if the organisation you’re paying doesn’t need the money right away.
Critical Direct Debit Scheme Rules That You Should Be Aware of
You must be informed of the sum and date of each payment in advance.
Direct Debit Guarantee
You have the right to an immediate refund on any payments that should not have been taken.
Three Advantages of Using Direct Debit to Make Payments
Since payments are automatic, bills are never forgotten, misplaced, or overdue.
Businesses can give discounts to customers who pay via direct debit.
Direct debit is Australia’s most secure payment form.
Managing Direct Debit
- Any adjustments to the sums to be billed or the payment dates should be communicated to you in advance – usually ten working days before the payment date.
- Check your bank or building society statement regularly. Direct debits are usually denoted by a DD next to the invoice. Check that the number and date paid to correspond to the advance notice. When setting up a direct debit Instruction, if you are given a choice of payment dates by direct debit companies, choose the one that better suits your cash flow. This way, you can be confident that there will be enough funds in your account and that you will not go overdrawn.
In a nutshell, direct debit is the easiest and most convenient way to pay your daily and irregular bills. It means you don’t have to worry about missing those essential payments, particularly while you’re on vacation, during peak seasons, or doing something else more pleasant than worrying about bills!
Ester Adams is a farmer of words in the field of creativity. She is an experienced independent content writer with a demonstrated history of working in the writing and editing industry. She is a multi-niche content chef who loves cooking new things.