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Direct Debit advantages and disadvantages

  • Direct Debit is one of the most common methods of payment for all kinds of products and services. Whether it’s paying monthly for a smartphone, rent or mortgage payments, or even a subscription to a service, the likelihood is that you’ll be making these payments via Direct Debit. If you’d like to discover all of Direct Debit’s advantages and disadvantages, continue reading our helpful guide.

What is Direct Debit?

Simply put, a Direct Debit is an instruction from you to your bank or building society authorising a company to collect scheduled payments from your bank account every month. Once you’ve agreed to the payment amount and the collection date with the organisation you’re paying, the money is deducted automatically from your account on the agreed date.

For example, you may have signed up to a smartphone contract with a service provider. Your agreed payments over a period of time - say 24 months - will be taken by Direct Debit.

If the organisation you have the agreement with wants to change the amount to be taken from your bank account, or the date of payment, they must first inform you first.

Direct Debit is the most simple and convenient way to pay regular, recurring bills. It means you no longer have to worry about missed payments, or manually making each payment throughout the month, freeing up your time.

Companies also use Direct Debits to pay their bills and any other recurring payments, just like their customers.

Advantages of Direct Debit

There are many advantages to using Direct Debit to make your recurring payments every month, for things like rent or mortgage payments, subscriptions like Netflix and Disney+, or even paying off a holiday that you’ve booked.

Direct Debit allows you to plan ahead and work out a structured payment plan without having to manually make the payments. Here are some more advantages of Direct Debit:

  • Spreads the costs
  • Flexible
  • Guaranteed
  • Saves you money
  • Peace of mind
  • Saves you time

Spreads the costs

Paying regular bills or business outgoings by Direct Debit allows you to spread costs over a period of time that you agree with the organisation you’re paying.

Flexible

Many organisations offer a range of flexible payment dates, which helps you to easily schedule your bills. Ask the organisation you are paying what options are available.

Guaranteed

Direct Debits come with a guarantee, so you’re automatically protected by three safeguards, which are:

Money back guarantee in the event of an error in the payment. Advance notice if the date of payment or amount is changed. The right to cancel at any time.

Saves you money

Because businesses find Direct Debit use convenient and efficient, they often provide discounts for customers willing to pay by Direct Debit.

Discounts can vary, of course, but Direct Debit savings can add up to a substantial amount each year compared to manually making payments. It’s worth checking when you get a bill to see how much you can save.

Peace of mind

Direct Debits are one of the safest and most convenient ways to make recurring payments. This is because payments are made automatically, so bills are never forgotten. Nothing can be lost in the post and there is no risk of late payments, either.

Saves you time

Direct Debits help you save time in your busy schedule too. Think of how many recurring payments you have to make every month and imagine how much time it would take to sort them all out manually. Direct Debit takes away the stress of managing payments, doing everything for you in the background.

Disadvantages of Direct Debit

Despite there being many advantages of Direct Debits, they do come with some downsides. One major disadvantage of Direct Debit is the time it takes to get paid for the first time. Payments work in set cycles, so you might have to wait to receive the initial payment.

Failure of payment is also a possible disadvantage. While rates of failure for Direct Debit payments are lower than that of credit or debit payments, there is still a possibility that transactions will not go through, especially if the customer has multiple payments coming out of their account at once without the proper funds.

The final disadvantage for Direct Debits comes down to trust. For a customer to agree to a Direct Debit they have to first trust the company they’re dealing with. If they feel uneasy or are unsure about the company, they may prefer to use manual payments. This naturally opens up the risk of late payments.

Direct Debit services at Interbacs

Interbacs’ Direct Debit Management System (DDMS) makes it easy to edit, cancel and create new Direct Debits. Our powerful management software is a full Direct Debit suite, which means fewer manual tasks and more automated payment services. Data is imported for processing and then converted into the most applicable format for your systems.

Our cutting-edge DDMS software makes Direct Debit mandate management an altogether simpler affair.

If you’d like to know more about the services we offer, please contact us on 0161 667 0758 or email us at sales@interbacs.com.