Direct debits and standing orders allow automatic payments to be withdrawn from your bank account. They can stop you from missing a payment and take away the hassle of paying manually. Here’s how they work and when you can use them.
There may not seem to be much of a difference between direct debits and standing orders – some might even think they are synonymous – but important differences dictate when they should be used.
They both let you set up an automatic payment from your bank account to another account, and the amount goes out regularly, such as once a month or quarterly.
The key differences are:
Direct debits are used to pay companies, typically for bills. You give the company permission to set up the direct debit to take whatever amount they need each time.
Standing orders are used to send money to any UK bank account. You set them up to pay the same amount each time, and you control them through your bank and can amend the amount or cancel the order at any time.
Both help you avoid missing payments you need or want to pay because they automatically come out of your account. You just need to make sure there is enough money in your account to cover the required sum each time.
What happens if there isn’t enough money in your account depends on your bank. They could refuse to send the money and charge you a fee. If the payment is for a bill and doesn’t go through, you may also have to pay a fee to the company you owe. If the money is debited, putting you in overdraft, you may be charged by your bank.
You usually have to be older than 16 or 18 to use them. You can send both types of payment from:
Standing orders let you control the payment yourself through your bank. But Direct debits allow a company to take the exact amount they need, which is why they are so useful for paying gas and electric bills where the amounts vary from one payment to the next.
Here are some of the ways you can use each payment type:
|Direct debit||Standing order|
|Paying utility bills||Regular payments to a person you know|
|Mortgage or loan payments||Regular payments to your savings account|
|Insurance premiums||Paying your rent|
|Paying for subscriptions like Spotify||Contributing to a charity|
You can consent to direct debits being set up to pay bills straight from your bank account automatically.
They come out of your account regularly, usually once a month, and the amount can change each time.
The amount needed is taken from your account directly by the business, so you do not control the amount paid, but it must tell you how much it will take in advance, usually with a bill, email or online statement.
You can only set up a direct debit through the company you need to pay. You can do this online, by phone, by post or by filling out a form in person to confirm the following, after which the direct debit will be arranged:
|Your name||Your bank account number|
|Your address||Your sort code|
|Your bank's name and address||The name on your bank account|
You can contact the company you pay to cancel a direct debit or change details, like the date they take the money.
You could also cancel it by contacting your bank, but the company could charge you a cancellation fee.
Note that you should not cancel a direct debit for important bills, such as Council Tax, without ensuring payments will continue seamlessly.
Every company that offers direct debits has to sign the Direct Debit Guarantee. This scheme provides the following protection:
You can cancel a direct debit whenever you need to
You get at least ten days’ notice before any changes can be made to the amount, frequency or date of your payment
A full, immediate refund if your bank or the company you have paid makes an error
When you set up a new payment, you should be given a copy of the Direct Debit Guarantee.
You can set up a standing order to send the same amount of money to another account in the UK on a regular date.
For example, you could send £100 on the first day of every month to your savings account.
You can use them to pay an account in the name of:
Another person like a relative or your landlord
A business or charity
The amount stays the same unless you change it, and they can last until a date of your choice or until you cancel it.
The funds usually arrive on the same day because they are sent through the bank’s faster payments service. It’s the same system as is used to make online bank transfers.
You can set up standing orders yourself through your bank either:
In a branch
You need to provide your bank with the following details:
|The amount||The destination account number|
|The start date||The destination sort code|
|How often the payment is made||The destination account name|
Contact your bank or log in to your online banking if you need to cancel a standing order or amend its:
The Current Account Switching Service arranges for all your direct debits and standing orders to be automatically moved to your new account if you decide to switch. This means all your payments can continue from your new account without you needing to change them yourself.
New current accounts deals are offered all the time, so compare all of the best options to make sure you get the right one for you.
No, it is free to set them up on your account. However, there are fees if a payment fails because there is not enough money in your account.
Logging into your account online is the quickest way to check them, but your bank can also confirm them by phone or in writing.
Banks do not usually limit the number you can have. You just need to make sure there is enough money in your account to cover them all.
Yes, the wrong amount could be sent or sent twice, but this is very rare. Your bank must refund you, so make sure you report it to them.
If you cancel a direct debit, you can claim the money back if the company still takes it. However, if you owe them money, you’ll still have to pay.
No, they leave on the specified day – for example, the first day of each month – except when it falls at a weekend or bank holiday, in which case it leaves on the next working day instead.