Direct Debit is often the cheapest way to pay for energy, but how does it work and what are the benefits?
uSwitch often advises people to pay for their gas and electricity by Direct Debit, primarily because of the savings energy suppliers will give you if you do.
However, we know that some people prefer to stick to paying by cash or cheque,
Others have questions about paying by Direct Debit: how does it work? how much control do you have over your payments? what happens if you want to switch your bank account?
So, we put your questions about Direct Debit to Mike Hutchinson, head of marketing at Bacs, the industry body responsible for the scheme.
What is Direct Debit?
Direct Debit is a reliable and trusted method that enables you to make regular and occasional payments from your bank account, helping you to conveniently manage your household bills.
Research shows that a massive 79% responded positively when asked what they thought of Direct Debit, with 63% citing that they prefer to pay most bills by Direct Debit.
Further research shows that one in four adults are now using Direct Debit
This is more than just a year ago, illustrating that more and more people are recognising that Direct Debit provides a simple, straightforward and convenient way to pay.
How does Direct Debit work?
Direct Debit is an agreement between yourself and your bank/building society, which authorises the bank/building society to allow an organisation to collect a regular or irregular payment from your account.
What is Bacs' involvement with the Direct Debit scheme?
Bacs is a not for profit, industry body, owned by 15 of the leading banks and building societies in the UK and Europe.
It is responsible for the schemes behind the clearing and settlement of automated payments in the UK and maintaining the integrity of payment related services. One of Bacs' principal electronic payment schemes is Direct Debit.
When I sign up for a Direct Debit, who am I making an agreement with?
When signing up for a Direct Debit you are making an agreement with the company for the collection of a pre-agreed payment amount on a specific date from your bank or building society.
A Direct Debit Instruction is then sent to your bank or building society, which authorises them to allow the company you are paying to collect payment.
What are the benefits of paying by Direct Debit?
It is a safe and secure way to pay bills and allows you to instruct and stipulate when regular payments will be made.
Direct Debit can help save you money by offering discounts that can reduce the cost of many monthly bills.
Direct Debit can help you save time and gives you peace of mind. Payments are made automatically, so bills are never forgotten or lost in the post and there's no risk of late payment charges.
All Direct Debit instructions are protected by the Direct Debit Guarantee, a consumer safeguard which is provided by all banks and building societies that operate under the Bacs Direct Debit scheme.
If an error is made in the payment of your Direct Debit, by the organisation or your bank or building society, you are entitled to a full and immediate refund of the amount paid from your bank or building society.
If you receive a refund you are not entitled to, you must pay it back when the organisation asks you to.
Can the amount of my Direct Debit or the date be changed without me knowing?
No. If the amount, date or frequency of your Direct Debit changes, the organisation collecting the payment must give you advance notice, normally 10 working days, prior to collecting the payment from your account.
If, however, there is an error and a Direct Debit payment is taken for too much, or the payment is taken on the wrong date, you are entitled to an immediate refund of the amount debited from your bank under the Direct Debit Guarantee. To claim a refund you should liaise directly with your bank/building society.
I'm nervous that switching to Direct Debit will mean I lose control of my finances - do you have any advice?
Direct Debit enables you to actually take more control of your finances by helping you to spread the cost of many regular household bills and save time.
With Direct Debit you can rest assured that, irrespective of external influences such as postal issues or cheques being mislaid, your payments will be made on time, every time, ensuring you don't get penalised for late or missed payments.
Direct Debit enables you to monitor and control exactly what will go out of your account each month and when, and you know what is left in your account to spend after the bills are all paid
Paying bills by Direct Debit means that you can often choose the date of payment, so you can arrange payments to coincide with your pay day. This means you are less likely to become overdrawn and accrue bank charges if, for example, you forget to pay a bill.
If I switch my bank account, won't it be hassle to move my Direct Debits? Is there a process I should follow?
Your new bank or building society will transfer all regular and recurring payments such as Direct Debits to another bank or building society, free of charge.
More information can be found about switching by asking a member of staff in any bank/building society branch, accessing the relevant website or its customer service helpline.
A useful account switching timeline and process chart can be accessed by visiting: www.thesmartwaytopay.co.uk/accountswitching
Most banks/building societies aim to complete the switch of your regular payments from your old account to your new account in around three weeks.
If you have asked your new bank to transfer the balance and close your old account as well, this should happen in the same period.
Can I stop a Direct Debit if I want to?
Yes, simply contact your bank or building society by going into the branch, or by phone or internet. If you decide to make contact by phone or internet, you may need to provide written confirmation of the cancellation.
A template letter for cancelling your Direct Debit can be downloaded by visiting www.directdebit.co.uk/helpcentre
It is recommended that you send the organisation that you are cancelling the Direct Debit with a copy of the letter that you have sent to your bank or building society.
What will happen if I don't have enough money in my bank account to pay my Direct Debit?
If you don't have enough funds available in your bank account to pay your Direct Debit, then it may be returned unpaid.
This could result in a charge from your bank to cover the additional administration. If this happens it is important to act quickly and make funds available in case the Direct Debit is re-presented for payment.
If you think that you may struggle to meet your Direct Debit payments, where possible you should contact the organisation concerned in advance of the payments being requested, so alternative payment options can be explored.