Difference Between Direct Debit and Standing Order
When it comes to making regular payments, people often get confused between direct debit and standing order. Both methods allow you to pay a fixed amount to a company or individual on a regular basis, but they work in slightly different ways. In this article, we will explore the key differences between these two payment methods.
What is a Direct Debit?
A direct debit is an agreement between two parties, usually a customer and a company, where the customer authorizes the company to take payment from their bank account on a regular basis for a fixed amount. The payment can be monthly, quarterly, or yearly, and can be for any service or product that the company offers.
One of the main advantages of direct debit is that the payment is automated, which means that you don’t have to remember to make the payment every time it is due. Once you set up the direct debit, the payment will be taken automatically on the agreed date. However, it is important to ensure that there are sufficient funds in your account to cover the payment, as failed direct debit payments can result in charges from your bank.
What is a Standing Order?
A standing order is also an agreement between two parties, where the customer authorizes their bank to make a fixed payment on a regular basis to the recipient’s bank account. However, unlike direct debits, standing orders are set up and controlled by the customer, not the recipient. This means that the customer must manually set up the payment and ensure that it is made on the agreed date.
The main advantage of standing orders is that they give the customer more control over their payments. They can cancel or change the payment at any time, and they can also choose the date on which the payment is made. However, this also means that the customer has to remember to make the payment every time it is due, which can be inconvenient if they have multiple standing orders to manage.
Which is Better, Direct Debit or Standing Order?
Both direct debit and standing order have their advantages and disadvantages, and which one you choose will depend on your personal preferences and circumstances. Direct debit is more convenient if you have a fixed amount to pay on a regular basis and you don’t want to worry about remembering to make the payment each time. Standing order is better if you want more control over your payments and need the flexibility to cancel or change them at any time.
In conclusion, direct debit and standing order are both popular payment methods that allow you to make regular payments to a company or individual. While they work in slightly different ways, they both have their advantages and disadvantages, and the choice between them will depend on your specific needs and preferences.
Table difference between direct debit or standing order
| Direct Debit | Standing Order |
|---|---|
| A payment is initiated by the payee | A payment is initiated by the payer |
| The amount may vary based on usage or invoice amount | The amount is fixed by the payer |
| The due date may vary based on usage or invoice date | The due date is fixed by the payer |
| The payer needs to authorize the payee to initiate the payment | The payer needs to set up the payment with their bank |
| The payer may cancel or amend the payment at any time | The payer needs to cancel or amend the payment with their bank |