A Direct Debit is a method of automated payment collection, through which businesses, charities or other organisations can collect varying amounts of money directly from customers’ accounts.
A Direct Debit is a cost-effective way of ensuring regular, safe and efficient payments of anything from household bills to charitable donations.
Unlike a standing order, which the payer initiates, a Direct Debit is initiated by the collecting organisation.
Once the customer has given the initial instruction, they aren’t required to do anything else, and money is transferred directly from the customer's bank to the collecting organisation's bank.
Why do businesses like Direct Debit?
- Direct Debits are cheaper than many other payment methods.
- It helps with cash flow as businesses can initiate the transaction and control the date of receiving payment.
- Businesses know the date they will receive cleared funds.
- It helps with customer retention, as customers don’t need to do anything to continue paying and receiving services.
- Unlike a standing order, the payment amount and frequency can be changed.
Why do customers like Direct Debits?
- It helps them to budget, as they know what they are paying on what day.
- They know that, as long as there are funds in their account, they won’t miss a payment and get cut off.
- They don’t need to do anything else once the initial instruction has been set up.
- They’re protected by the Direct Debit guarantee.
