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Category: Banking
Direct debits are a way to pay regular bills from your current account (such as your council tax or TV licence).
You can set up a direct debit by signing a Direct Debit Mandate form, by going into branch or calling your bank. A direct debit can be set up to pay on a particular date every month, quarter or year.
Money is then taken from your current account automatically, according to your instructions.
The main difference to a standing order is that the company or person you are paying can change the amount of the direct debit or the date they take it – although they must inform you of this first.
If there isn't enough money in your account to pay a direct debit, your current account may have a buffer zone. This is basically a small interest free overdraft that your bank won't charge you for if you creep into it.
Exceed the buffer zone and your bank or building society may not pay the direct debit and might even charge you a fee. If paying a direct debit pushes you into an unauthorised overdraft, you may have to pay additional charges as well.
If you know beforehand that you won't have enough in your bank account, the best thing to do is arrange a temporary overdraft with your bank to pay the direct debit. Alternatively you could try to negotiate a later payment date with the company in question.
If you miss direct debits regularly you should consider changing payment dates or paying by a different method.
You can cancel a direct debit at any time. However, make sure you inform the person or company that receives the payment before you do, as you could incur fees or penalties for non-payment of a bill.
This could even go onto your credit file if you don't pay a bill in a certain timeframe.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.