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Understand what direct debit is, what it is used for, and what a direct debit procedure looks like
Direct debit is a method of payment by which a pre-authorized agreement allows one organization to debit another person or organization's bank account. Direct debits are made automatically and on a regular basis.
Direct debit is often used for recurring payments such as:
Parties involved in a direct debit transaction:
Direct debit procedure
This is a form of payments by which the lender has the ability to write off the required amount of money from the account of the payer-client of the bank, without having to turn to his counterparty each time to make a money transfer. The creditor provides the documents confirming the right to a monetary claim to the payer's bank.
To do this, the bank's client must first generate a long-term order for the bank to carry out such operations, that is, give his preliminary consent that his counterparty can write off money from the account, independently calculating the amount due to him. Thus, in a direct debit, the payment originator is the beneficiary (supplier).
The order of the bank client to carry out a direct debit looks like an additional agreement or statement, which stipulates the terms and conditions of such operations for each individual lender. A power of attorney for direct debit is drawn up in three copies:
Some companies may make direct debit payments a prerequisite to subscribing to their product or service. Direct debit can be a useful way to manage your payments, especially if you are forgetful or very busy. This method reduces the risk of late payments. Some utilities and organizations also offer direct debit discounts.
Benefits of direct debit
Whether you use direct debit to pay household bills or business expenses, the benefits of direct debit are well worth the minutes it takes to set up a procedure:
Distributes costs. Paying recurring bills or selling expenses using direct debit allows you to spread your expenses over a period agreed with the entity you pay to.
Guarantee. Direct debit payments come with a guarantee:
Peace of mind. Direct debit is one of the safest and most reliable ways to pay bills. Payments are made automatically, so invoices are never forgotten, lost or delayed in the mail, and there is no risk of being charged for late payments. In addition, organizations using a direct debit scheme must go through a rigorous verification process.
How do I cancel a direct debit?
Canceling a direct debit is as simple as notifying your bank 24 hours before the due date. What's really important is letting the organization you use know that you are no longer going to pay them with direct debit. But (and this is an important point) this is not the same as giving up the services of the organization, you are just changing the payment method.
Direct debit takes away most of the hassle of paying bills and eliminates the need for queuing at the bank. It will make it easier for you to pay your bills, and you will know exactly how much money is spent on it each month. For businesses, paying with direct debit also means less workload and less paperwork for the finance department.
Direct debit is a method of payment by which a pre-authorized agreement allows one organization to debit another person or organization's bank account. Direct debits are made automatically and on a regular basis.
Direct debit is often used for recurring payments such as:
- insurance premiums
- rent
- mortgage payments
- subscriptions (e.g. Netflix, Spotify)
- mobile phone and internet bills
- utility bills.
Parties involved in a direct debit transaction:
- Payer - a natural or legal person who has a current account with a bank.
- Beneficiary - the recipient of payments to the bank account.
- Banking institutions on the part of the payer and the creditor.
Direct debit procedure
This is a form of payments by which the lender has the ability to write off the required amount of money from the account of the payer-client of the bank, without having to turn to his counterparty each time to make a money transfer. The creditor provides the documents confirming the right to a monetary claim to the payer's bank.
To do this, the bank's client must first generate a long-term order for the bank to carry out such operations, that is, give his preliminary consent that his counterparty can write off money from the account, independently calculating the amount due to him. Thus, in a direct debit, the payment originator is the beneficiary (supplier).
The order of the bank client to carry out a direct debit looks like an additional agreement or statement, which stipulates the terms and conditions of such operations for each individual lender. A power of attorney for direct debit is drawn up in three copies:
- The first copy is kept in the payer's bank as a document by which the payer authorizes the bank to make payments without his participation.
- The second copy, certified by the bank, is transferred by the payer to his creditor as the basis for invoicing and receiving money.
- The third copy of the standing order remains with the account holder.
Some companies may make direct debit payments a prerequisite to subscribing to their product or service. Direct debit can be a useful way to manage your payments, especially if you are forgetful or very busy. This method reduces the risk of late payments. Some utilities and organizations also offer direct debit discounts.
Benefits of direct debit
Whether you use direct debit to pay household bills or business expenses, the benefits of direct debit are well worth the minutes it takes to set up a procedure:
Distributes costs. Paying recurring bills or selling expenses using direct debit allows you to spread your expenses over a period agreed with the entity you pay to.
Guarantee. Direct debit payments come with a guarantee:
- Guaranteed immediate refund by the bank in case of an error
- Advance notice when the date or amount to be debited changes
- The right to cancel payments at any time.
Peace of mind. Direct debit is one of the safest and most reliable ways to pay bills. Payments are made automatically, so invoices are never forgotten, lost or delayed in the mail, and there is no risk of being charged for late payments. In addition, organizations using a direct debit scheme must go through a rigorous verification process.
How do I cancel a direct debit?
Canceling a direct debit is as simple as notifying your bank 24 hours before the due date. What's really important is letting the organization you use know that you are no longer going to pay them with direct debit. But (and this is an important point) this is not the same as giving up the services of the organization, you are just changing the payment method.
Direct debit takes away most of the hassle of paying bills and eliminates the need for queuing at the bank. It will make it easier for you to pay your bills, and you will know exactly how much money is spent on it each month. For businesses, paying with direct debit also means less workload and less paperwork for the finance department.
