Direct Debits: everything you need to know

Direct Debits can help you pay your bills on time, but there can be some confusion over how exactly these work. We reveal everything you need to know.

What is a Direct Debit and how do I set one up?

Direct Debits for bills, Council Tax and more

Anyone with a current account or a basic bank account can set up a Direct Debit.

The minimum age is based on the minimum age of opening a bank account, which for some accounts is as young as 11 years old.

Most banks will only open current accounts to those over the age of 18, whilst most fee-free basic bank accounts can be opened by 16-year-olds.

Direct Debits are most commonly used to pay for Council Tax, energy bills and more.

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Cancelling a Direct Debit

Am I protected?

The Direct Debit Guarantee is a safety net for anybody using Direct Debits by protecting customers if payments have been made incorrectly or fraudulently.

The Guarantee is offered by all banks and building societies that allow customers to set up Direct Debits.

It provides assurance to everybody with a Direct Debit that any money wrongfully taken by the specific company will be fully refunded by the bank.

To receive a refund from your bank or building society, you need to contact them directly as they are responsible for refunding you, regardless of whether the fault was theirs or the organisation taking the payment.

What if I don't have the money in my account?

You can be charged if a Direct Debit payment is refused due to lack of funds. 

If there is not enough money in an account, the organisation will try to take the pre-arranged amount later in the day.

The retry process was introduced in 2013 to give customers the opportunity to put money in their account if the first payment is unsuccessful.

A bounced payment will be re-attempted later that day, at 2pm at the earliest, and if it is successful, you won’t incur any late payment charges or unpaid item fees.

It is only if the second attempt is also unsuccessful that you could face charges.

Best accounts often require Direct Debits

Technically you don’t need to set up a Direct Debit, but many of the most generous current accounts require that you have at least two active Direct Debits in order to claim any switching rewards or perks on offer.

They do this to try and force you to make that your primary account (ie the one you pay money in and out of each month) rather than simply open it for the perks and never use it again.

As a result, savvy customers will set up as many Direct Debits as possible so they can take advantage of numerous generous bank accounts.

But there is some confusion over what payments constitute a Direct Debit, as some people wrongly assume any regular monthly payment that's taken out of an account each month counts.

We'll explain more in the next two sections.

Best bank accounts for switching reward

How is a recurring payment different from a Direct Debit?

Benefits of Direct Debits

You can't forget to pay your bills 

Possibly the best thing about Direct Debits is that once they are set up, you don't need to remember to manually pay your bills each month, which reduces the risk of costly late payments.

They can get you rewards

Bank accounts that offer attractive joining rewards are often dependent on you having two or more active Direct Debits on that account.

They save time

Not having to manually pay the bills also saves you a lot of time in terms of managing the payments each month.

Direct Debits are secure

Being covered by the Direct Debit Guarantee is a big positive of Direct Debits when compared to CPAs and Standing Orders, as it means you will always get your money back if something goes wrong.

They are easy to set up

As outlined above, setting up a Direct Debit is as easy as doing a normal bank transfer, and once it's done, it's done.

Direct Debits are flexible

Once they are set up, the amount to be paid by Direct Debit and the date that the money leaves your account can easily be changed.

You can also easily cancel any Direct Debits that you no longer want or need.