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Direct Debits

Direct Debits

Many companies ask you to sign up to a Direct Debit agreement in order for them to agree to accept your business, be it to pay utility bills, for loans or mortgages, or for a contract telephone, for example. Once you have signed the Direct Debit Mandate (DDM) you are giving the company concerned, permission to take payments from your account at agreed intervals (usually monthly, but sometimes quarterly or annually).

Although the amounts should be notified in advance, they can often change, and a lot of consumers are unaware that their bank cannot see how much will be taken until it actually goes out. The amount is not under your, or your banks, control. You are, however, covered by the Direct Debit Guarantee, should any type of mistake be made. Under this scheme your monies are guaranteed to be refunded immediately, once you complain to the bank.

Companies prefer the use of Direct Debits for a number of reasons. Firstly, as mentioned, they have control over the amounts to be deducted. Secondly, it is cheaper for them to administer, and finally, they are notified immediately if the payment is not made (due normally to a lack of funds in your account). Many will offer incentives for you to pay by DDM, such as reducing your bill

Standing Orders

When you complete a Standing order, you are giving your bank or building society and instruction to pay monies to another persons bank or building society (either an individual or a company). The sum can never be altered, unless you cancel the Standing Order and setup a new one.

With a standing order, the payments are totally in your control, and neither the bank nor the receipient of the monies can alter the payment amount or regularity.

Although you can set up a Standing Order to pay many normal household bills, such as rent, you must be aware that the amount paid will remain unchanged. So for example, if you paid by Direct Debit and your rent went up, the Direct Debit would automatically change to reflect the rise, however, with a Standing Order, the amount would not change, and you would find yourself in arears.

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