Are direct debits affected by a new card? 💳

No. Getting a new debit or credit card will not affect direct debits at all. When you authorize a direct debit, the funds will be taken off your bank account, irrespective of the cards linked to that account.

Are direct debits paid on weekends? 🍹

No. In the UK and in most countries that use similar direct debit systems, direct debits won't be paid on weekends or bank holidays, and they'll instead be deferred to the next business day. This is the case even when the day of the month on which you set up your direct debit happens to fall on a weekend.

Are direct debits safe? 🔐

Yes. Direct debits are a secure, legitimate, and widely-used method of transferring funds from one bank account to another, and are protected by the Direct Debit Guarantee in the UK. While we do recommend that you exercise a bit of healthy vigilance after authorizing a new direct debit, i.e. by monitoring how much money comes off of your account every month and on which day, there is practically no risk that the organization charging you will deduct any more money from you than was authorized. This would be illegal, for a start, and, what's more, companies that offer direct debit payment options will have been vetted and given the green light by your country's payment authority in the first place, making them a safe and secure payment method indeed.

Do direct debits always have to be monthly? 📆

Not at all! While monthly payments via direct debit are the most common, they're by no means the only option you've got. Depending on what you're paying for, you can just as easily set up your direct debit to be charged on a specific date, at quarterly intervals, or even at annual intervals.

Can direct debits come out of a credit card? 💳

No, strictly speaking, they cannot. Direct debits are charged to your bank account directly, meaning that they're not linked at all to your debit or credit card. Instead, if you'd like to be charged a recurring amount on your credit or debit card, you could set up a continuous payment authority (CPA), which are similar to direct debits in many ways. In general, however, we recommend against paying with CPAs, as they are widely regarded as being less safe than debit orders and more prone to abuse.

Can direct debits be taken early? ⏪

Yes, it's possible but unlikely. In general, you'll find your direct debits charged in a timeous manner, and you won't have to worry about being charged too early. However, companies charging direct debits sometimes make mistakes, which can result in a direct debit being charged early. In these relatively rare instances, we'd recommend that you approach the company directly and request compensation for the early payment, or, if you live in the UK, approach your bank and request that the direct debit be reversed. Under the terms of the Direct Debit Guarantee, your bank will be obliged to assist you in this regard.

Do direct debits improve my credit score? 🧾

While direct debit payments won't improve your credit score in and of themselves, the regularity of the payments can help you to organize your financial life and get you on top of your monthly expenses. As a result, authorizing direct debits can help ensure that you don't miss any payments, which can indirectly improve your credit score by protecting it!

Direct Debit

What Is a Direct Debit?

A direct debit (also called a "DD", "direct withdrawal", or "debit order") is a popular and convenient payment method where funds are automatically deducted from your bank account for a pre-authorized expense.

Understanding Direct Debits

Most commonly used for recurring payments, such as cellular contracts, credit card payments, utility bills and other regular expenses, direct debits allow companies to deduct funds directly from your bank account. In turn, this gives you the convenience of not having to instruct the same payment on a regular basis.

Direct debits are widely used in many countries across the world, including the United Kingdom, United States, Australia, Canada, and the Eurozone countries. They can be thought of as a special type of bank transfer which, like ordinary transfers such as standing orders and direct deposits, make use of the funds transfer system of the country in question, such as the ACH in the US, CHAPS in the UK, and SEPA in the EU.

Unlike other types of money transfers, however, direct debits are instructed not by the payer but by the payee. This means that although the payer does need to provide some form of initial authorization for the direct debits (the particularities of which differ from country to country), the ultimate instruction for the payment comes from the payee.

The Pros & Cons of Direct Debits

Direct debits present a safe and convenient payment service that has the upper hand over other payment methods for a number of key reasons. For example, direct debits offer the following advantages to consumers:

Great for recurring payments, whether they're fixed or variable;
A very secure payment service with a lot of consumer protections;
Typically comes at no cost;
Associated with greater convenience and flexibility.

On the other hand, direct debits can present several challenges and disadvantages which don't always make them the best payment service for all circumstances. These might include:

High fees when bank balance is too low to cover the expense;
Can be forgotten about and lead to unnecessary expense;
In some cases, cancellation can be a lengthy process;
Associated with less control.

So, When Should I Choose Direct Debit?

For the reasons we touched on above, direct debits may indeed be your best bet if you need to pay for certain types of services. Assuming direct debits are available in your country, we recommend that you set up a direct debit if you have a recurring expense that you'd like to pay for directly from your bank account.

Bear in mind that many people opt to use regular bank transfers rather than direct debits for some everyday expenses such as rental payments and savings deposits. This is usually because direct debits are sometimes unavailable, as the payee in these cases aren't firms and are therefore restricted from supporting direct debits.

As a result, we recommend that you first explore whether or not your regular expense can indeed be paid for using direct debit services, and then opt for the service whenever you feel it makes sense for you.

Photo by Sincerely Media on Unsplash

The Monito Glossary

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You May Still Be Wondering...

Are direct debits affected by a new card? 💳

No. Getting a new debit or credit card will not affect direct debits at all. When you authorize a direct debit, the funds will be taken off your bank account, irrespective of the cards linked to that account.
Are direct debits paid on weekends? 🍹

No. In the UK and in most countries that use similar direct debit systems, direct debits won't be paid on weekends or bank holidays, and they'll instead be deferred to the next business day. This is the case even when the day of the month on which you set up your direct debit happens to fall on a weekend.
Are direct debits safe? 🔐

Yes. Direct debits are a secure, legitimate, and widely-used method of transferring funds from one bank account to another, and are protected by the Direct Debit Guarantee in the UK. While we do recommend that you exercise a bit of healthy vigilance after authorizing a new direct debit, i.e. by monitoring how much money comes off of your account every month and on which day, there is practically no risk that the organization charging you will deduct any more money from you than was authorized. This would be illegal, for a start, and, what's more, companies that offer direct debit payment options will have been vetted and given the green light by your country's payment authority in the first place, making them a safe and secure payment method indeed.
Do direct debits always have to be monthly? 📆

Not at all! While monthly payments via direct debit are the most common, they're by no means the only option you've got. Depending on what you're paying for, you can just as easily set up your direct debit to be charged on a specific date, at quarterly intervals, or even at annual intervals.
Can direct debits come out of a credit card? 💳

No, strictly speaking, they cannot. Direct debits are charged to your bank account directly, meaning that they're not linked at all to your debit or credit card. Instead, if you'd like to be charged a recurring amount on your credit or debit card, you could set up a continuous payment authority (CPA), which are similar to direct debits in many ways. In general, however, we recommend against paying with CPAs, as they are widely regarded as being less safe than debit orders and more prone to abuse.
Can direct debits be taken early? ⏪

Yes, it's possible but unlikely. In general, you'll find your direct debits charged in a timeous manner, and you won't have to worry about being charged too early. However, companies charging direct debits sometimes make mistakes, which can result in a direct debit being charged early. In these relatively rare instances, we'd recommend that you approach the company directly and request compensation for the early payment, or, if you live in the UK, approach your bank and request that the direct debit be reversed. Under the terms of the Direct Debit Guarantee, your bank will be obliged to assist you in this regard.
Do direct debits improve my credit score? 🧾

While direct debit payments won't improve your credit score in and of themselves, the regularity of the payments can help you to organize your financial life and get you on top of your monthly expenses. As a result, authorizing direct debits can help ensure that you don't miss any payments, which can indirectly improve your credit score by protecting it!

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