What is a Direct Debit?

Revolut Contributor

 · 03/17/2020  · 03/17/2020

What is a Direct Debit? How does it work? Is it the same as a Standing Order?

Let’s find out below. 👇

What is Direct Debit Payment?

Safe, convenient, and simple to use, a Direct Debit is a popular automated payment method that takes the hassle out of paying bills.  

More than 80% of us in the UK have at least one Direct Debit payment set up, while the average consumer has five or more.

In a nutshell, a Direct Debit is an instruction from you to your bank, authorising an organisation to collect payment from your account — but only if you’ve been given advance notice of the dates and amounts of collection.

The money is deducted automatically on or around the date agreed. If the organisation wishes to change the date or payment amount, it must notify you first.

How does Direct Debit work?

For an organisation to collect Direct Debit payments, it must provide you with a Direct Debit Mandate (or Direct Debit Instruction). This is a form that you need to fill in with your bank details, providing authorisation to an organisation and allowing them to take payment from your account.

What are the benefits of Direct Debit?

No-one likes paying bills, but Direct Debit makes it easier. You don’t have to carefully track your calendar to stay on top of due dates with Direct Debit, and you don’t have to visit the bank or call up a billing department to make payments either.

But that’s not all. Other benefits include:

  • Protection: Direct Debits come with a guarantee, so you're automatically protected in three vital areas:
    • You must receive prior notice if the amount, date or frequency of collection changes;
    • You have an immediate money-back guarantee from your bank should an error occur when paying your Direct Debit;
    • And you have the right to cancel the Direct Debit at any time.
  • The option to spread costs: By paying your bills by Direct Debit, you can spread the costs over an agreed-upon period of time.
  • Peace of mind: Direct Debit is one of the safest ways of paying your bills. Your payments are made automatically, so bills are never forgotten, lost or delayed by the postal service, and there's no risk of late charges. And organisations using the scheme are carefully vetted and monitored closely by the banking industry.

What’s the difference between Standing Order and Direct Debit?

Some people think that Direct Debits and Standing Orders are one and the same — but they are in fact two different payment methods.

Standing Order vs Direct Debit

Standing Order Meaning:

  • Instruct your bank to make payments to an organisation or individual.
  • Are used for regular, fixed payments, such as rent payments, regular payments into a savings account, or charity donations.
  • Do not offer any consumer protection. Difficult to get money back if paid in error.

Bonus: What is a Standing Order and how does it work?

Direct Debit Meaning:

  • Authorise an organisation to collect payments from your account on an agreed date.
  • Are used for regular variable or fixed payments, such as mortgage payments, utility bills or mobile phone bills.
  • Offer consumer protection. In the event of an incorrect payment, you will receive an immediate refund from your bank.

You can learn more on our article about the difference between standing order and direct debit.

How to set up a Direct Debit in Revolut

You don’t need to inform us directly when setting up a Direct Debit. All you need to do is provide the company with your GBP or EUR account details. These can be found in the Revolut app.

If you’re asked to provide an address for GBP Direct Debits, you can use this one: Revolut, 7 Westferry Circus, Canary Wharf, London E14 4HD.

Please note that Direct Debits are currently only supported in Pound Sterling and Euro. Learn more here.

Read more: