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What is Direct Debit? A guide for payers

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As Global Head of Content Marketing, Chris oversees all of the content requirements for our organic, growth marketing, and demand generation campaigns. This requires a fundamental understanding of the pain points our customers are experiencing and a thorough comprehension of the ways those customers consume and engage with content. A growth marketing expert in the tech space, Chris has worked with complex global businesses such as Google, AWS, Microsoft, SAP, Adobe, Dell and Oracle to grow their most valuable customers, increase revenue and speed up deal cycles. He has also led on customer lifecycle management programs and account-based marketing strategies for BlackRock, EY, Grant Thornton and UBS. ConnectSee full bio

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David and his team manage relationships with banks, scheme providers, and other parties involved in payment transactions in the UK and Scandinavia. David has worked in the finance and payment industry for over 12 years, primarily focusing on the BACs and Faster Payments schemes. He has sat on governance committees and chaired cross-government public sector working groups. David is also a regular attendee at the SIBOS and MoneyLIVE financial conferences. ConnectSee full bio

Last editedDec 20222 min read

Direct Debit is the simplest, safest and most convenient way to make regular or recurring payments; that’s why it’s used for things like council tax and utility bills.

4.6 billion Direct Debits were processed in the UK during 2021 (source). 80% of Brits have at least one Direct Debit. The average consumer has six set up. Despite this, many people remain unsure what Direct Debit is or when it should be used.

If you’re looking to set up a regular payment, read this guide to find out what Direct Debit is and what it means for you.

What is a Direct Debit?

A Direct Debit is an instruction from you to your bank, authorising someone to collect payments from your account when they are due. You give this authorisation by completing a Direct Debit Mandate form – this can be a paper form or a web page that you complete online.

Once authorised, the organisation can automatically take payments from you (provided that they comply with the scheme rules).

What can Direct Debit payments be used for?

Direct Debit can be used for most payments but below are some examples of where it's used most often:

Regular bills for variable amounts - With Direct Debit you know all your important bills will be paid on time each month.
Fixed subscriptions or memberships - Direct Debit is the safest and easiest way to make recurring payments like magazine subscriptions or gym memberships.
Paying on account – Some organisations will provide Direct Debit as an option for spreading your costs or paying on account.

Direct Debit can be used for one-off payments too

While Direct Debit is usually associated with regular and recurring payments, it can also be used for one-off payments. Direct Debit should not be used for one-off payments where instant transfer of funds is needed, like e-commerce. However, if the organisation you're paying doesn't need the money immediately, Direct Debit can be a great option.

What are the important Direct Debit scheme rules that I should know?

Advance notice - You must be told the amount and date of each payment in advance.
Direct Debit guarantee - You are entitled to an immediate refund for any payments that shouldn’t have been taken.

It's important to familiarise yourself with the requirements of the Direct Debit scheme. Take a look at our blog posts linked here to get a more in-depth view of both advance notice and the Direct Debit guarantee.

Direct Debit is safe, convenient and cost effective for customers

There are three benefits to making payments using Direct Debit:

Convenience - Payments are automatic, so bills are never forgotten, lost or delayed.
Cost - Businesses may offer incentives for paying by Direct Debit.
Customer Protection – Direct Debit is the safest payment method in the UK.

Visit our blog post to read in more depth about the benefits of using Direct Debit.

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Direct Debit vs Standing Order

The differences between Direct Debits and standing orders are subtle and many people get confused between these two payment methods. However, it's important to understand what they are, as they vary quite substantially in their pros and cons for payers.

We’ve set out a summary of these differences for you below:

	Standing Order	Direct Debit
What is it?	An instruction to your bank to make payments to a person/organisation.	An authorisation for a person/organisation to take payments from your account when they are due.
What is it used for?	Regular, fixed payments like rent payments, monthly charity donations or regular payments into a savings account.	Regular payments of variable or fixed amounts like mortgage payments, utility bills or other bills based on usage.
How do you set one up?	You instruct your bank. You decide when and how much to pay, and tell your bank to do this.	You complete an instruction form then you won’t need to do anything else.
Customer protection	None. Once you pay, you can't get it back.	High. Immediate refunds from your bank in the event of an incorrect payment.

Standing orders give you control. Direct Debit gives you flexibility and safety

Standing orders are good for regular payments of a fixed amount. However, if you want to pay variable amounts or might need to change payment amounts then standing orders are not the most practical option.

Direct Debit lets you pay variable amounts or at varying intervals without needing to do anything more. This makes it great for paying bills where you are charged depending on what you have spent that month.

Direct Debit is the safest way to make payments in the UK. The Direct Debit Guarantee gives you a right to immediate refunds for any payments which shouldn't have been taken. Find out more about security with GoCardless.

Direct Debit and GoCardless

GoCardless is the UK’s leading Direct Debit provider and is used by over 70,000 organisations including Docusign and The Guardian.

Switching to Direct Debit with GoCardless will save you the hassle of paying each month. You’ll be notified of any upcoming payments, and you can cancel them whenever you want. What’s more, the Direct Debit Guarantee makes this the safest way to pay.

To learn about the basics from a business' perspective, try our overview of Direct Debit for small business.