When it comes to direct debit vs standing order, both are automatic payment methods but have some important differences.
A standing order is an automated payment system that a consumer can set up through their bank. Fixed amounts can be sent to other people, organisations, or bank accounts regularly.
A standing order can be used to:
- Transfer funds across your accounts
- Send money regularly to a friend or family member
- Pay your rent or mortgage
- Donate to a charitable organisation
A Direct Debit authorises someone to withdraw funds from your account when they are due.
It is used for a variety of payments, but is most commonly used to pay:
- Regular bills for varying amounts – You can be confident that all of your key invoices will be paid on time each month
- Fixed subscriptions or memberships – It’s the most secure and convenient method of making regular payments, such as magazine subscriptions or gym memberships
- Paying on account – Some businesses will provide Direct Debit as a method of spreading out your expenditures or paying on account
- Both the payer and the payee are usually free of charge
- Setup time for the payer is short
- Payer can determine the amount sent
- Payer can choose how long the standing order will be active for
- No payment notifications
- Less flexibility
- Risk of late payment
- High admin
Who can use them?
Many factors affect whether you should utilise standing orders or Direct Debits for payments. Standing orders are ideal for small enterprises, organisations, or groups with less than 25 consumers. They are ineffective for payments with fluctuating amounts or frequency, like electricity bills or credit card obligations.
Can standing order payments be refunded?
A standing order payment is similar to cash or check payments in that you may only receive a refund if the person you paid agrees. However, if the standing order was set up and deducted from your account unlawfully (i.e. without your permission), your bank is required to repay you. According to the Financial Conduct Authority, you must be repaid by the end of the business day after notification of the fraud.