Standing Order or Direct Debit – What’s the difference?

Jan 19, 2018

What is the Problem?

"What is the difference between a Standing Order and a Direct Debit?"

While this may seem like a very simple question, it is still a very important one. In the program we go over the important differences. Not knowing which is best can cost you control and perhaps some cash. And we don’t want that do we?

Your Due Diligence

It seems weird saying this; never trust bank staff to be able to explain banking products, services and or processes correctly, because in this modern age bank staff are often the least informed people when it comes down to banking code and banking practice. And that’s coming from an ex-banker!

The Outline Solution

A Standing Order:

  • is an instruction from you, to your bank, to pay (typically) a regular amount, for a set period of time, or until further notice. You are known as the payer, and you send the money to the payee.
  • Payments can be weekly, monthly or at other regular intervals and YOU are in full control.
  • If the day of the payment falls on a weekend, the standing order should leave your account the next available working day.

You create the instruction/order.

As opposed to...

A Direct Debit:

  • This is an authority handed to your bank, authorising them to accept third party "dips" into your account: usually for a specified amount on, or around, a specified date.
  • Because there is an obvious ability for any third party to abuse such an authority, the direct debit comes with a guarantee. The guarantee enables you  to claw back incorrect deductions (subject to certain conditions)

Possible Arguments Against You

Standing Order

The Standing Order provides You with the greatest level of “hands on control” (ignoring errors, or mistakes by bank staff when setting it up); but this also places responsibility upon you to get the account numbers, amounts and timings correct. You can't blame others for your mistakes!

Direct Debit

The Direct Debit, is less secure, less reliable, and provides you with less control. Why do you think Direct Debits are promoted by companies as opposed to Standing Orders?

The Almost Legal Info

Standing Order

  • You have very few excuses for making mistakes yourself, though any third party receiving too much should hold those funds, in trust, to your order; especially where they haven’t earned them, and or were not reasonably expecting them.

Direct Debit

  • Offers a “Guarantee” that you can claw back payments in certain circumstances (where an ‘error’ has occurred)
  • There is a growing trend for bank staff to obstruct Direct Debit claw backs, under the Direct Debit Guarantee, which in itself may contradict the whole idea of a ‘guarantee’.

Helpful Info:

  • Standing Orders can be used to reduce the term of your mortgage: to find out more why not watch the Mortgage Destroyer series.
    If You don’t like the idea of automated payments, you can always pay by cheque, though some companies may charge you for paying in this way, and many will not accept cash.

Need More Help?

If you want to find out more about the Direct Debit Guarantee visit the ToolBox and check out the Direct Debit Guarantee & Indemnity Clawback training.

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