Working out the difference between direct debits and standing orders might save you money and time. We explain the differences, and walk you through which is better for you.
At some point everyone has had to use a direct debit or standing order. From paying your rent to handling your electricity bill, you’ll definitely have heard of these terms.
In essence, both are forms of regular automatic payment. So it might be easy to confuse them.
However they are entirely separate payment types. We walk you through their key differences and explain which is better for what – from your monthly rent to your gym fees.
What is the difference between a direct debit and standing order?
Direct debits
With a direct debit a company or organisation takes money out of your account on a regular basis.
You provide them your account details and generally have to sign a mandate.
The withdrawals might be every month, quarter or year.
The amount taken isn’t necessarily the same each time.
However, the organisation does have to tell you in advance (normally 10 working days) if the amount or date will be changed.
So an example might be your electricity or phone bill, your gym membership or your university tuition fees.
You aren’t charged any extra fees when the direct debit is set up. However, you may incur penalty fees if you don’t have the funds to make the payment.
Standing orders
A standing order is a payment you set up yourself to automatically send a fixed amount on a regular basis.
You can do this on your banking app, using online banking or by heading into a branch.
People typically use this to either regularly move money between accounts or to send a fixed amount to someone else regularly.
You might use a standing order to move money into your savings account, to pay for rent or to send money to that friend who organises the weekly football match.
You aren’t charged any extra fees for setting up the standing order. However, you may incur penalty fees if you don’t have the funds to make the payment.
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Which is better direct debit or standing order?
As ever, it depends! One major plus about direct debits is that lots of utility providers give you a discount for using them. So they could save you money.
You can say goodbye to late fees for forgetting a payment too. After all, with direct debits the onus is on the company to sort the payment out.
What about standing orders? Well, they’re good in instances where you can’t use a direct debit – paying your landlord for instance. Or, if you want to regularly move money from your main account into a savings account, then a standing order is ideal.
Both share a potentially quite costly downside. If you fail to stay on top of your regular payments you could end up wasting money on services or products you don’t need anymore. Or even incur penalty fees if you don’t have enough money in your account to make the direct debit or standing order.
How to set up direct debits and standing orders
So you’ve worked out which type of payment is more suited to your needs. Whether you’re paying university fees or sorting out your gas bill.
Find out below how to actually go about setting up a direct direct or standing order.
Direct debit
The organisation taking the payment will give you instructions.
Typically you fill out a form and send it to them.
Or you provide them details online or over the phone.
They then contact your bank and set up the direct debit.
You can cancel your direct debit at anytime by contacting your bank or through online banking.
Standing order
Depending on your bank or building society, set them up online or over the phone.
Or head into a branch and fill out a form. You’ll need the account details of the person you’re paying.
They’re flexible. Cancel or change the amount or payment date anytime.
Frequently asked questions
To change details such as the amount you pay or the date of your direct debit payments you’ll have to contact the company. However, you can cancel them yourself – typically you can do this through online banking. If you do this, it’s best practice to inform the company that you’ve stopped the direct debit.
Your bank won’t charge you for setting either of them up. However, if you have insufficient funds in your account to make the payment, you may be charged for a refused payment, typically between £5 and £25. Or you may go into your overdraft and potentially pay fees for going into the red.
Neither, it’s a recurring card payment. It’s similar to a direct debit but Netflix will use your debit card information rather than your current account details (your account number and sort code).
These are sometimes also called continuous payment authority or future card payments.
You’ll use these for making Amazon Prime or magazine subscription payments too.
It depends on whether your landlord is set up to do direct debits or not. At the moment many still ask for standing orders. One potential downside of this is it makes it easier to pay rent late, incurring late fees.
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Felix Thompson is a freelance writer at Finder. He covers everything from digital banking to car insurance and, whatever the topic, he aims to make it easy for consumers to get straight to the best deal. Felix has a postgraduate qualification in international journalism and is also a broadcast journalist. In his spare time, he loves to cycle.
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