Direct Debits
A direct debit is a facility which allows a creditor to receive payment from your bank account automatically. It saves you having to write a cheque or even having to remember to pay. This can be used to pay for both fixed and variable bills.
The Direct Debit Guarantee ensures that the bank will be liable if any errors are to occur. Regularly check what direct debits and standing orders you have set up and whether they are still valid to your day-to-day spending.
Direct debits can attract savings in certain circumstances – for example there are discounts for direct debits set up in relation to home phone, broadband, gas and electricity bills.
A standing order is an instruction for your bank to make regular payments to another account (yours or someone else’s). You tell the bank the amount you want to pay, on which date and they will debit this amount until you tell them to stop. It is a free service to install and can be cancelled whenever you ask the bank to do so.
Recurring Payments
A recurring payment is automatically taken from your account. You can't cancel the deduction by contacting your bank, canceling your card or closing your account. If you do close your account, it will still continue to be charged. You have to contact the company directly if you wish to stop the payment. It is mainly used for online subscriptions, i.e. adult entertainment, and is extremely hard to cancel.
It can also be usd by car insurance companies, so if you don't wish to continue your policy after the first year, contact the insurance company, and tell them you wish to cancel. If you don't there is a chance you will be charged for the second year's insurance.
Cheques
Cheques are simply another form of debiting. By writing a cheque you are promising to pay the person or company the stated amount. It usually takes a few days for the money to be debited from one account before it is credited to another.
It is worth noting that the bank can ‘bounce’ the cheque if there isn’t enough money in the account, meaning the goods are technically unpaid for. If the bank notices a repeat pattern they will charge you. As of November 2007:
- Cheques should now be earning interest within 2 days of being paid
- Withdrawal of cash written by cheque should occur within 4 days
- Cheques should be completely cleared within 6 days
