Paying utility and financial services firms by direct debit gives you peace of mind that you won’t miss a payment.
Signing up to this system gives a firm authority to take payments from your account to meet regular, fixed payments. Energy, mobile phone and plenty of other bills are met this way – but how safe is this option?
After all, we are bombarded by warnings to be wary of handing over our bank details. Or you may fear a firm taking money that is not due to them. To reduce any worry, there are several safeguards in place.
Five direct debit myths busted.
Direct debit guarantee
The direct debit guarantee ensures that your bank will refund any disputed questions without any hassle, and pending any further investigations. Any firm signed up to the system is also vetted and approved – once approved, it must give indemnity guarantees through their bank. This enables you to reclaim money in the event of any dispute.
If you want to cancel a direct debit, you can do so automatically by contacting your bank and notifying the firm. You may need to provide written confirmation.
There are plenty of other advantages to paying by direct debit. Here are some of them:
Many firms will offer discounts to customers paying this way. The cheapest energy tariffs, for example, are often only available to people paying by direct debit. Some companies will even impose additional charges if you don’t pay by direct debit.
You can spread the cost of bills using direct debit and save time sorting them out as it’s done automatically. However, it’s worth checking if you’d be better off paying in a lump sum. Occasionally - such as in the case of car or home insurance - you may pay more over time than paying in one lump sum.
Could a thief raid your bank account by simply walking past you?
As payments are taken automatically from your account you may feel more in control of your finances. You will also be certain that you won’t fall behind, which can easily happen if stacks of bills pile up over time. You will never be late with payment, provided the direct debit is set up properly – so check that payment is being taken.
Many companies will let you choose the payment date, so you can set up your Direct Debit to be paid at a time that suits you – perhaps just after pay day, when you know there will be funds in your bank account and you are in no danger of going overdrawn.
Some people worry that by setting up payments to be made automatically, they lose control and companies could take as much money as they want, when they want. This is not the case, you have to be notified in advance – usually 10 working days – of any changes to the amount to be paid or payment date.
Five signs that something is a scam.
As the same amount is taken each time, you will be able to tot up how much your household bills are costing you easily.
Essentially, ask if there are any discounts for paying this way, and be assured that you’re protected if anything goes wrong.
For more tips and useful information, browse our money articles.