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Sujai Adithya
Business Development and Banking & Financial Services Expert
Asked a question last year

What does direct debit mean?

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Sujai Adithya
Business Development and Banking & Financial Services Expert
  • Direct debit is a type of facility provided by the banks to make life easy for their customer.
  • In direct debit, the payee has right to withdraw the fund due for payment from the account of the payer.
  • It is a facility in which the payee withdraws the amount from the payer's account, the payer has instructed the bank to allow the payee directly withdraw the amount from the account.
  • Direct debit is a simple and more convenient to both the parties for smooth transactions. 
  • Direct Debit is a financial activity in which one person withdraws funds from another person's bank account. Formally, the person who directly draws the funds ("the payee") instructs his or her bank to collect (i.e., debit) an amount directly from another's ("the payer's") bank account designated by the payer and pay those funds into a bank account designated by the payee.
  • A Direct Debit gives authority to someone to collect payments from your account when they are due.
  • Once authorized, the organisation can automatically transfer payments from payer’s to account to the payee’s account.

Advantages:

  • You don't have to worry about remembering payment. So, it saves time and effort.
  • No penalty for late payment.
  • It is safe and secure.
  • Some organisations give benefit by paying direct debit.
  • If the bank has by mistake credited in someone else's account, the bank will pay back in your account.

Direct Debit is the simplest, safest and most convenient way to make regular or recurring payments; that’s why it’s used for things like council tax and utility bills.

80% of Brits have at least one Direct Debit and the average consumer has six, but many people remain unsure what Direct Debit is or when it should be used. If you’re looking to set up a regular payment, read this guide to find out what Direct Debit is and if it’s right for you. 

Direct Debit can be used for most payments but it’s most often used to pay:

Regular bills for variable amounts - With Direct Debit you know all your important bills will be paid on time each month. In 2011 2.4bn payments were made by Direct Debit for utility bills and council taxes.