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Distinction Between Direct Debit and Standing Order

Let us start with the understanding of the direct debit and standing order. Both are financial methods of paying fixed amount on fixed dates. Both of these are increasingly being used in the business environment. These are not only used by business organizations but also by people who have recurrent payments that need to be done periodically. Most of the people are unaware of the dissimilarities between the two because both seem familiar. Hope this article helps you understand the difference.

 

Direct debit is where the payee withdraws the amount specified by the payer from the bank account of the payer. This withdrawal takes place on the basis of a mandate form, online form or a telephone interaction. The amount and dates can be altered by the company itself but it is the duty of the payee (company) to send a prior notice to the payer regarding the money withdrawal and the alterations.

 

For direct debit transaction to take place both the banks of the payee and payer should provide this facility. The banks should also ensure direct debit guarantee, which states that if there is any error in money transaction then the bank has to refund the amount to the payee. In UK direct debits are more famous than a standing order.

 

Standing order is quite similar to the direct debit in term of the payment method but the two things that differ are: The payer will order his/her bank to pay the payee with specified amounts which is quite the opposite of direct debit.

 

The second thing being that the amount and dates of the transaction can be altered only by you and not the company. But mostly no changes are made in payment amount when standing order is used. The standing order is much simpler than the direct debit but it cannot be utilized by all businesses.

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