Direct Debit > Why Direct Debit
Find out how Direct Debit can work for you.
Firstly, what is it?
Put simply, Direct Debit is an automated payment method that people and businesses use to pay for things like: household bills; services you might use (such as a mobile phone or the gym); or large purchases, where it’s easier for you to spread the cost rather than make one, big payment. That’s everything from your electricity, water, council tax, and some of the TV subscription services, to paying for a sofa, a gigantic TV, or even a car, over time. People who want to support charities can also make a regular donation by Direct Debit.
How does it work?
You set up a Direct Debit Instruction with an organisation that’s allowed to collect money this way. This Instruction tells your bank that you’ve agreed the organisation can request the payment from your bank account, and that the bank has your authority to pay it.
The Instruction might be processed online, over the phone, or submitted on paper. Whichever it is, it will have the name and address of the organisation you’re paying; your name and address; your bank account details; the date you made the agreement; a number for the collecting organisation (called a service user number); and a reference for the payment. It will also contain information on the Direct Debit Guarantee.
Direct Debit Instruction example
As part of the Instruction agreement, the people collecting the money must tell you when the payment will be taken and how much it will be – that’s your advance notice, and it normally comes as a bill.
Visit using Direct Debit for information on managing Direct Debits.
Why Direct Debit is a good thing
Once you’ve set up the Instruction, you don’t need to do anything. The payment will be collected, like clockwork.
That means no late payment charges, no worries about an important service being cancelled because you forgot to pay, and no wasting time going through bills and manually sending individual payments.
Direct Debit works around you, enabling you to plan your outgoings. Lots of organisations offer you a choice of when you want to pay each month, so you’ll know what date the payment will be taken, fitting it around things, like your salary coming in.
