Differences between Direct Debit and Standing Order in the UK
Introduction:
Direct debit and standing order are two popular payment methods used in the UK. While both the methods involve automatic payments, there are some key differences between the two. In this article, we’ll explore the differences between direct debit and standing order in the UK.
Definition:
Direct debit is a payment method that allows a company or organization to withdraw payment from your bank account on a regular basis, such as monthly or quarterly. This requires you to authorize the company to withdraw the payment from your account.
Standing order is also an automatic payment method, but it works in a slightly different way. With a standing order, you set up a regular payment from your bank account to another account, such as paying rent or bills. Unlike direct debit, you initiate the payment, and it occurs on a regular basis until you cancel it.
Control:
One of the main differences between direct debits and standing orders is who has control over the payment. With a direct debit, the company or organization initiating the payment is in control. They can vary the amount or the frequency of the payment without informing you. This can be helpful for businesses that may need to adjust the payment to account for seasonal fluctuations in demand.
With a standing order, you are in control of the payment. You set up the payment, and you can decide when and how to stop it. This gives you more control over your finances and makes it easier to budget for recurring expenses.
Flexibility:
Another difference between direct debit and standing order is their flexibility. With a direct debit, the payment amount can vary each month, and the payment date can change too. This is because the company or organization initiating the payment has the control. As a result, it can be challenging to budget for direct debits because you never quite know how much or when the payment will go out.
Standing orders, on the other hand, are fixed payments that occur at regular intervals, such as weekly or monthly. This makes it easier to budget and plan for expenses because you know exactly how much and when the payment will occur.
Fees:
Finally, there is a difference in fees between direct debit and standing order. Direct debits typically have no fee, but sometimes companies may charge for not paying by direct debit. Standing orders may be charged by your bank, but the fees are usually lower than those for direct debits.
Conclusion:
In summary, direct debit and standing order are both automatic payment methods, but they have some key differences. With direct debit, the company or organization initiating the payment is in control, while with standing order, you have more control over the payment. Direct debit payments also vary in amount and frequency, while standing orders are fixed payments. Understanding these differences can help you choose the best payment method for your needs.
Table difference between direct debit and standing order uk
| Direct Debit | Standing Order |
|---|---|
| Agreement between the payer and payee to take payments from the payer’s account on specific dates | An instruction given by the payer to their bank to make regular payments of a fixed amount to the payee’s account on specific dates |
| Amount and date can vary with the payee’s agreement | Amount and date are fixed by the payer |
| Useful for variable or intermittent payments such as utility bills and insurance premiums | Useful for regular fixed payments such as rent, mortgage or savings |
| Payee initiates the payment | Payer initiates the payment |
| Payer has the right to cancel or amend the payment before the due date | Payer has to cancel or amend the payment with their bank in advance of the next payment date |