How to set up a Direct Debit

A Direct Debit is a useful way to help you pay for subscriptions and services that may cost a different amount each time.

The money comes out of your account automatically too, so you don’t have to set up a new payment every time you need to pay.

Luckily, setting up a Direct Debit is really easy. And when it can save you the grief of missing a payment on things like your credit card, it’s well worth doing.

Speak to the company you want to pay

For the most part, you don’t even have to deal with your bank when setting up a Direct Debit.

It’s usually done by speaking with the company you’re looking to set up the payment with. Just how you go about this depends on the company, but you might be able to do it by giving them a call, filling in your details online or returning a form that they send you.

You’ll only need to give them your sort code and account number, but sometimes they’ll ask for the address of your bank, too. For this reason, you’ll need a current account to make a Direct Debit.

Direct Debits are best used for bills that aren’t a fixed amount each time. So things like your energy bills, a mobile phone contract or credit cards are best paid this way because there’s no guarantee it will cost the same each month.

Paying a credit card by Direct Debit

When you take out a credit card, your card provider might offer to set up a Direct Debit for you. They could ask whether you’d like to clear the balance in full every month or just make a minimum payment.

It’s always best to clear your balance in full as this means you don’t have to pay any interest.

But if you’re using the credit card to spread the cost of a big ticket item, you could set a Direct Debit up to make just the minimum payment each month. This way you’re protected from missing the payment and being charged (and facing damage to your credit history), but you still have the option to pay more than that if you can afford to.

Remember, it’s important to keep an eye on your spending if you’ve set up a Direct Debit to clear the balance in full. Whether on your debit or credit card, if you’ve spent more than you can afford, the Direct Debit could fail and you may be charged.

Plus, if the payment doesn’t reach your credit card provider in time, your credit history could be damaged too.

Should I set up a standing order instead?

With a Direct Debit, you’re in control over how often the cash comes out, but not the exact date or the amount.

For fixed payments that you have to make regularly – like your rent – a standing order may be more appropriate.

Here, you choose how much you want to pay, how often you’d like to pay, on what date the cash comes out and how long you make the payment for.

Often you might choose to pay this way when it’s to another person’s current account, rather than to a company. For example, you might set up a standing order if you give your child a bit of cash every month to help them at university.

You’ll have to get in touch with your bank if you want to set up a standing order.