You have house rent, bank mortgages, or utility bills to pay. Like many people, you will either have a setup of Direct Debits or Standing orders to meet your regular payments. You might not ever try to familiarize yourself with what each of these payment methods is and how they work. You may also do not know what the primary difference between Direct Debit and Standing Order is.
Let’s cover these two aspects of both the payment methods and highlight the difference and uses of each.
Direct Debit lets you make a payment from your bank account to the payee’s bank account. The method allows the payee’s bank to pull the money from your payment account. Your bank will pass this instruction to the payee so that they can communicate it to their bank.
The instruction will have all the relevant detail of the payee, such as account number, sort code, bank name, and frequency and time of the payments. You will notify the payee before each payment about how they can take it and when. To protect the transactions, each bank involved in this process must offer Direct Debit.
Standing orders work as an instruction that you make to schedule payments on a set time for a fixed amount on a repeating basis. Once set up, a standing order works almost similar to a Direct Debit except for two primary characteristics.
First, you can only use it for sending the money, where the payment amounts do not change. Secondly, the payer will make instruction to their bank to transfer the specific payment to the beneficiary’s account.
The above differences remove many restrictions and complexities that come with Direct Debits. It also opens up the opportunity for the payer to schedule the payment to send to the payee’s account. It means you can set up the standing orders between your families, friends, and even between your two separate bank accounts.