When it comes to paying regular bills from your bank account - whether that's your TV licence, gas & electricity or Council Tax - setting up a Direct Debit could be the easiest and cheapest way to pay.
How does a Direct Debit work?
If you decide to set up a Direct Debit to make a payment, the money will be automatically taken from your bank account by the company you're paying on the same date every month. This could go a long way towards ensuring you never miss a bill. If your monthly payments are fixed, it can also help you keep track of your finances.
How can you set up a Direct Debit?
If you want to pay a bill by Direct Debit, the process should be fairly simple.
You may be sent a Direct Debit Mandate form, which you would sign and return to the company in the post (or at a bank branch). In some cases you may be able to do it over the phone or online. The company can then set the Direct Debit up according to your instruction. You can arrange payments to be taken on a specific date (usually on a monthly, quarterly or yearly basis).
Standing orders are similar to Direct Debits. The main difference is that the company taking payments using a Direct Debit can change how much is taken from your bank account - and when. Having said that, the company must tell you first, so you shouldn't have to worry about any changes coming out of the blue.
What are the benefits of paying by Direct Debit?
There are a number of advantages to paying by Direct Debit:
- You'll know what date your payments will be automatically taken each month, which should reassure you that you won't accidentally fall behind with your bills.
- Many companies offer a discount if you pay by Direct Debit - e.g. 5-10% of your annual bill. Some companies may do this in the form of cashback or a rebate.
- Energy bills, which fluctuate throughout the year if you pay for the exact amount used, can be spread out in fixed monthly payments on a Direct Debit plan. This means you're less likely to struggle with your bills in the cold winter months, when the heating's on.
What are the downsides of paying by Direct Debit? As with any payment method, there are some potential downsides too:
- If you don't have enough money in your account for your Direct Debit payment, you could face penalty charges if you go into an unauthorised overdraft, or if you fail to make the payment altogether.
- Unless you provide regular meter readings, energy companies calculate your bills by estimating your usage. This can cause problems if it turns out the amount you're paying doesn't quite cover your usage, as you will build up arrears that must be paid. If you prefer to pay for exactly what you use, Direct Debit might not be for you.
How can you cancel a Direct Debit?
If you decide to cancel a Direct Debit, you can do so at any time. Simply contact your bank or building society and tell them you no longer wish for payments to be taken. You can even do it through your internet banking.
You should also inform the company taking the payments - otherwise you could risk penalty charges if a bill goes unpaid.
A spokesperson for thinkmoney commented: "Keeping track of monthly bills in the current climate is more important than ever - and setting up Direct Debits for things such as your gas & electricity bills could be the ideal way of keeping track.
"With the thinkmoney Personal Account - an alternative to high street bank accounts - you'll have extra reassurance that all the bills and monthly essentials you tell us about are covered. Our Money Managers will set aside the money you need every month, so you won't have to worry about accidentally spending the cash you need.
"Furthermore, you won't have to worry about any additional fees or charges for non-payment of bills. All you'll pay is a set monthly fee of £14.50 per month (or £21.25 for a joint account)."