If you are one to forget paying recurring payments, you know how frustrating this can be. Both direct debits and standing orders are game changers when it comes to this! They are both forms of automated payments, hence making sure you pay your bills on time without the hassle of having to remember.

This guide is to help you understand the difference between a direct debit and standing order as well as how much they cost and how to work out any issues related to them.

Differences Between a Direct Debit and Standing Order:

What is a Direct Debit?

A direct debit is when you give a company permission to take money from your bank account on an agreed date. A direct debit is useful for paying regular bills such as electricity.  For example, you may use a Direct Debit to pay your electricity bills or even your gas tab.

The organisation will have to tell you in advance (usually 10 working days) how much they will be deducting, when and how often. The organisation is obligated to notify you if there is a change to the amount charged or date you are charged. A

If you’re looking to cancel your direct debit you can read about it here.

Who can use a Direct Debit?

Anyone with a basic bank account and a current account can set up a direct debit. Take note, some prepaid cards or even credit union cards may be used. However, Post Office card accounts are not allowed. You would need to be over the age of 11 to set up direct debits, depending on the account you hold. It is best to check with your bank or building society to be sure.

How to set it up?

Get in contact with the organisation you would like to set a direct debit with. Typically, you will be asked to fill in a form and send it to them, or set it up online or via phone. Once this is done, the company will let your bank know.

If you would like to cancel your direct debit, you can do so by following the steps in this guide.

Does a direct debit cost anything?

No. You will not be charged by either the corporation or bank when you set up a direct debit. However, if you do not have enough money in the account to cover a direct debit payment, your bank will be authorised to refuse to make the payment. You may be charged typically £5 to £25 for this. If they do make the payment, you may go into the red without notice. This means you may have to pay overdraft charges.

If a payment fails, your bank may also contact you, so you are aware and can put money into the account. This option is known as the ‘retry process’. This process gives you until 2pm as a minimum to pay funds into your account in order to cover the payment when your bank retries later in the day.

You are protected under the Direct Debit Guarantee. If you have an issue with your direct debit, you should contact your bank or building society.

What is a Standing Order?

A standing order is a regular payment you set up to move money between accounts, be it your own or someone else’s. It is typically used to transfer money on a regular basis to a savings account. Differing from a direct debit, a standing order pays the exact amount you choose when you set up the order. Direct debits are most often used to pay fixed costs such as rental. For example, you may set up a standing order for your monthly rental of £900 to be transferred to your landlord.

A standing order can be set up to keep paying a set amount indefinitely, or to end on a particular date or after a set number of payments. Standing orders can also be used to move money between your own accounts. For example, if you are looking to pay a set amount each month into a savings account, a standing order would be very useful to you.

Who can use a Standing Order?

Just like a direct debit, you would need to be over the age of 11 to use a standing order, depending on the account you hold. It is best to check with your bank or building society to be sure.

A standing order can be set up from a basic bank account as well as a current account. Similar to direct debits, some prepaid cards or credit union accounts can be used for standing order. However, Post Office card accounts are not allowed.

How to set it up?

A standing order can be set up online, mobile banking or even via phone. In order to set it up, you will need the account number and sort code of the person you are paying. A standing order can be terminated at any point of time, and you can change the amount or payment date as well.

Does a standing order cost anything?

No, you will not be charged to set up a standing order.

However, if you do not have enough money in the account to cover a standing order payment, your bank will be authorised to refuse to make the payment. You may be charged typically £5 to £25 for this. If they do make the payment, you may go into the red without notice. This means you may have to pay overdraft charges.

If a payment fails, your bank may also contact you, so you are aware and can put money into the account. This option is known as the ‘retry process’. This process gives you until 2pm as a minimum to pay funds into your account in order to cover the payment when your bank retries later in the day.

Before confirming a standing order, be sure to double-check the bank account details you have filled as well as the amount and payment date. It is your responsibility to ensure the payment is to the right person and the amount is correct as well.

If you have a problem with your standing order, contact your bank or building society immediately.

I hope you find this guide useful. Remember, whilst both direct debits and standing orders help save time, you need to keep track of them to be aware of your financial status.

To help you keep track of them, you should download Nova now. Nova will help categorise your direct debits and standing orders. You will be notified of not just your transactions but also your financial status as a whole. The app is aimed to improve financial habits in a fun and fulfilling way. It is the only personal finance app to reward good spending habits.

So what are you waiting for? Download Nova now to take control of your finances and push yourself to attain financial freedom.