How do I set up a Direct Debit, what is a Direct Debit and why does it differ from a standing order?

Direct Debits are one of the most common ways to make regular payments to all kinds of suppliers, especially for household bills like gas, electricity, telephone (including landline and mobile), home entertainment subscriptions, TV Licence, insurance – the list goes on and on.

Over four billion Direct Debit payments are processed every year, and around 90% of the adult British population pay at least one bill via Direct Debit, often benefiting from a discount or more spread-out payments by doing so.

Everyone also benefits from the Direct Debit Guarantee, which protects you against any payments being taken from your account without warning, or against incorrect amounts being taken from you by suppliers.

How to set up a Direct Debit

If you’ve never used Direct Debit before, you might be surprised that there is usually no option to set up a Direct Debit via online banking – but there is a good reason for this.

The usual way to set up a Direct Debit is to contact the supplier directly. You give them your account details, including your sort code and account number, the account provider (Arro Money, for Arro customers), the account holder’s name and address.

Only authorised suppliers are allowed to accept payment by Direct Debit, so you can feel more confident that you are dealing with a reputable organisation – just be wary of any online fraudsters who claim to accept Direct Debit when they are not authorised to do so.

The supplier will then contact Arro Money (or your high street bank, if you’re an account holder elsewhere) and use your details to set up a Direct Debit agreement.

You always have control over this. Direct Debit can only be set up with your express permission, and you can cancel the arrangement in the future by contacting the supplier directly or, if you have a reason why you’d prefer not to do that, you can cancel the payment in your Arro Money online dashboard instead.

What is a Direct Debit?

A Direct Debit is usually a regular payment commitment. It might be for a fixed period of time – for example, a mobile phone contract or one year’s insurance premiums – or an ongoing arrangement, e.g. for utility bills.

There are a few defining features that are specific to Direct Debits:

  • Only authorised suppliers can accept payment by Direct Debit.
  • The Direct Debit Guarantee protects you against mistakes.
  • The supplier can adjust the amount taken and the collection date (you will always be notified if so).

But in many ways it also works like any regular payment out of your account, and many people have a mixture of Direct Debits and standing orders set up to manage all of the money that goes out of their account to pay monthly bills.

Direct Debits vs. Standing Orders

Direct Debits might sound a lot like standing orders – regular monthly payments that can be limited to a period of time or a number of instalments. So how are they different?

Direct DebitsStanding Orders
Usually set up with the supplierUsually set up in your account dashboard
Supplier can adjust amount takenFixed amount determined by your settings
Supplier can adjust date takenPaid on a predetermined date you choose
Notified before a payment is takenNo notifications as standard
Protected by Direct Debit GuaranteeNo built-in protection against mistakes/fraud
Only authorised suppliers can useCan make payments to any account number
Typically cancelled with the supplierCancelled directly via your account dashboard

 

With a standing order, you know that the payment is completely fixed – the amount cannot change and it will be paid on (or very close to) the date you specify yourself when you set up the standing order.

You can use standing orders or ‘SOs’ to pay individuals, or even to transfer regular amounts between your own accounts, such as paying into a savings account each time you get paid by work.

Direct Debits give the supplier some permissions, such as to change how much they take from you, but this is carefully controlled – only authorised suppliers can do it, and the Direct Debit Guarantee means you will be paid back if they take too much.

Is there a Direct Debit app?

There is a ‘Direct Debit Control Centre’ app available from BACS for iPhone and Android, but it doesn’t actually link with your online account or bank accounts – you have to manually enter every Direct Debit you set up and it will not be aware of any changes to your collection date or amount.

Remember though, the Arro Money online dashboard is completely mobile-friendly through your phone’s web browser, with no need to install an app, and you can always see any Direct Debits, standing orders and other account transactions just by logging in from your phone, desktop computer or other internet-enabled device.