Direct debit is a standard payment system in the United Kingdom in which customers grant authorization to retailers, organizations or third parties to take payments from their bank accounts.

Authorization is necessary when setting up a direct debit transaction to enable the third-party requesting payments to make withdrawals from your account.

The amount deducts once you have set up the authorization (after adding additional actions to make the payment, i.e. entering credit card details or password for initiating a bank transfer).

Direct debit is an instruction given by you to your bank.

In several countries around the world, direct debit has become a popular form of payment. Direct debit helps to make payment of various transactions, such as paying regular bills and occasional bills and is considered simple, cost-effective, and safe.

It is acceptable for almost every type of payments, but it is most commonly used to pay:

  • Subscription/membership payments (to magazines, gyms, mobile service providers, etc.)
  • Utility bills (electricity, water)
  • Rent payments
  • Council taxes and many more

How to cancel a direct debit

An individual can cancel a direct debit at any moment, and the procedure is straightforward.

  • Contact your bank or building society directly. Written confirmation requires if it is by phone or online.
  • In general, the bank or building society would need at least a day’s notice before it is due to pay the Direct Debit.
  • Try not to postpone it until the last minute because you run the risk of payment made, so it is best to check how long you need to do this with your bank or building society.
  • Always remember that direct debit cancellation prevents transfers or payments. So, if an individual still wants to continue receiving the goods or service, they will have to arrange an alternate payment method.

The details an individual must provide for cancelling a Direct Debit are as follows:

  • Name of the third party or organization that you are paying
  • Your building society or bank account number
  • Name mentioned on the account.
  • Branch sort code available on debit card or internet banking app.

Direct Debit guarantee

It is offered by all building societies and banks that accept instructions or permissions to pay direct debit. The direct debit guarantee provides a range of protections to prevent consumers from falsely or fraudulently making payments.

It is also known as “Direct Debit Indemnity.” In practice, less than 0.2% of payments got the reimbursement. It offers protection to customers by:

  • Giving advance notice of the amount and date of payment
  • Giving immediate refunds known as indemnity claim in case of false payments made
  • Providing instant cancellations to customers.

Benefits of Direct Debit

  • Direct debit allows individuals to make their payments timely.
  • Direct debit is very Convenient as it escapes the hassle of making payment manually as payments are automatic, so bills are never lost, forgotten, or delayed.
  • Direct debit is the most-safest payment method as it maintains security by offering customer protection, and it decreases the risk of late payments.
  • This card-less payment method has a lower failure rate than other payment forms, such as credit card transactions.
  • It ensures payments for the products and services, which ultimately results in better cash flow.
  • Direct debit favours customers a lot and guarantees that customers are not responsible for incorrect or fraudulent payments because the money is automatically refunded by Direct Debit Guarantee if there is any payment mistake.