The 3 things you should never use Direct Debit for (2024)

FAQs

The 3 things you should never use Direct Debit for? ›

You can be charged overdraft or late fees: If there are insufficient funds in the buyer's account, the Direct Debit might still go through with overdraft protection. However, they'll be charged a fee by the bank – and potentially the biller.

You can be charged overdraft or late fees: If there are insufficient funds in the buyer's account, the Direct Debit might still go through with overdraft protection. However, they'll be charged a fee by the bank – and potentially the biller.

Direct Debit: not for instant, high risk or high value transactions.

If you don't have enough money in your account

Most banks will contact you if a payment has failed, giving you a deadline to put enough money in – often by 2pm that same day. If they still can't make the payment, you might have to pay an unpaid transaction fee or overdraft interest if they make it anyway.

For this reason, direct debit can be useful for repeat purchases, subscriptions and regular expenses such as bills and utilities. The terms of payment are fairly flexible and can be set according to the customer and merchant's needs.

Nope. The customer bank simply sees it as a Bacs transfer out more or less. The company that collects direct debits, depending on the setup pays fees to do direct debits.

Criminals will ask for your bank account or personal details, which they'll use to make a Direct Debit refund request with the bank. The refund will be made and the criminal will take a cut of this money as payment for letting you know about the service.

In the rare event that an error is made in the payment of your Direct Debit, contact your bank or building society straightaway. It's the bank that is responsible for refunding you in the event of a mistake, even if the original error was made by the organisation collecting the payment.

Can money be collected from my account after I have cancelled a Direct Debit Instruction? No. If you do see a payment after cancelling, contact your bank immediately and claim a refund under the Direct Debit Guarantee.

Who actually controls Direct Debit payments? You do. As the account holder, you can cancel any time you want, just as you can set up a Direct Debit Instruction. Outside of that, your bank or building society is responsible for running your account, including all payments, such as Direct Debit.

Is a phone bill a Direct Debit? ›

A Direct Debit can only be set up by the organisation to which you're making the payment. Normally, you sign a mandate that gives the company permission to take funds from your account in an agreed way – like a monthly gym membership or your mobile phone bill.

Returned Direct Debits, or bounced payments, occur when there is not enough money in your account and can lead to you incurring hefty charges.

Despite there being many advantages of Direct Debits, they do come with some downsides. One major disadvantage of Direct Debit is the time it takes to get paid for the first time. Payments work in set cycles, so you might have to wait to receive the initial payment. Failure of payment is also a possible disadvantage.

However, direct debits can become a problem if: You don't have enough money in your account. The service provider is untrustworthy. You don't know how to cancel the payments when you need to.

The disadvantages of direct debit

Check for extra fees too. You must watch your account balance or credit limit to make sure there is enough money to cover every direct debit when it comes. This is difficult when the amount varies (for example, your electricity bill).

Every organisation using Direct Debit is inspected and vetted by the banks before they're allowed to collect your money. The banks are responsible for money being refunded if things were to go wrong, so you can bet they're very thorough.