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How to set up a direct debit

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Direct debits are a good way of keeping on top of bills, as they allow you to set up a payment on a particular date every month, quarter or even year.

You can set up a direct debit by signing a Direct Debit Mandate form, by going into a branch or calling your bank. 

Money is then taken from your current account automatically by the company you are paying, according to the instructions you gave.

What is the difference between a direct debit and a standing order?

The main difference between the two is that with a standing order 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, giving a certain number of days’ notice.

What if I don’t have enough in my bank account to pay a direct debit?

If there isn’t enough money in your account to cover the amount needed for the direct debit payment, your current account may have a buffer zone.

This is basically a small interest-free overdraft that your bank won’t charge you for.

However, if you exceed the amount of the overdraft, your current account provider might reject paying the whole amount – which often means that you incur a fee for unpaid bills.

Also if paying a direct debit pushes you into an unauthorised overdraft, you may have to pay additional charges as well.

If you know before the payment date of your direct debit that you will not have enough to cover it, you should try to arrange a temporary overdraft with your bank, or speak to the company to see if it possible to change the date of the payment.

If you miss direct debits regularly you should consider changing payment dates or paying by a different method.


How to cancel a direct debit

You can cancel a direct debit at any time. But remember to let the company or person know that you are cancelling it, as not doing so might mean that you are charged a penalty for non-payment of a bill.

Missing payments can also affect your credit rating as some companies or payees can chase up a bill via legal methods.

Finally, the Direct Debit Guarantee Scheme

The direct debit guarantee applies to all banks and building societies taking part in the direct debit scheme. It says that:
• if there is a change in the amount to be paid or the payment date, the person receiving the payment (the originator) must notify the customer in advance.
• if the originator or the bank/building society makes an error, the customer is guaranteed a full and immediate refund of the amount paid.
• customers can cancel a direct debit at any time by writing to their bank or building society.


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