Standing Orders, Direct Debits -and Post-Dated Cheques

There are three main ways of making regular payments into and out of many types of bank and building society accounts. They have various advantages and drawbacks, and there is one major mistake everyone makes in trying to keep their payments going through on time...

Standing Orders

A Standing Order (SO) is an instruction to your bank to make payments of a particular amount on a specific date.

You control when the arrangement ends either by telling the bank to make a specific number of payments, or by giving special instructions when you decide to end the payments.

You can plan to make certain there are sufficient funds in your account because you know the date on which the payments are going to be made.

Your bank is responsible for sending out the payments on or after the date you specify.

Direct Debits

Direct Debits (DD's) are your agreement that someone else can dip into your account on a regular basis.

The receiving company - any firm or public utility - is responsible for sending a request to your bank to ask for the money on or after the agreed date.

Some of our callers have signed a blank form, having been told the starting date and payments verbally; DO NOT DO THIS!

Get the form filled in before you sign it, and get a copy so that you know exactly how much will be taken from your account and the date the transfer should occur.

Note that Direct Debits are usually variable - when your subscription goes up in future, the receiving company need only send you 'reasonable notice' by letter that they will be changing the amount.

If you do not object or cancel the payment, the debit will go through. MAKE SURE that if you receive notice of an increase, you look at the original amount of the debit and check that the increase is reasonable. The company is not responsible for telling you what you USED to pay...

Direct Debit changes

Some companies now have the facility to set up Direct Debit transfers on their own computer - the form is not processed by their bank, or by yours; the accounts department of the company key in the details to set up your transfers. In some ways this is good - it cuts costs, involves less paperwork, and generates fewer mistakes because the information is only keyed in once. It does mean that a Direct Debit could be set up or changed without your authority if someone gets hold of your bank account information. Check your statements carefully to make sure you know and approve of who has your money.

THE DIRECT DEBIT GUARANTEE

If you have any problems with a Direct Debit, THE BANK MUST REFUND THE DISPUTED PAYMENT IMMEDIATELY. Ask them to do so. If you have any problems, please tell NABC - we will be pleased to inform the bank, and BACS who administer the system.

Paying Cash into the bank

There is a common mistake with SO's and DD's.

If a payment is due in a few days, and there is not enough in the account, many people go into the bank on the day the debit is due to pay in enough cash to cover the transfer.

The bank cannot transfer funds before the agreed day, but SO and DD processing is now done by computer, often on morning of the due date.

Paying in the cash at lunchtime is already too late.

If you are going to pay in cash,

SO and DD arrangements are a useful way of organising regular payments.

BUT the problems they cause when things go wrong have to be seen to be believed.

Insurances can be cancelled, debits paid twice, threatening letters exchanged - not to mention the charges you pay for having your payment 'bounce' and your account in overdraft.

Cancelling a Payment

If you decide to tell your bank not to pay a debit because you know you will not have the necessary funds, do so a few working days in advance so the computer debits can be stopped.

DO IT IN WRITING - if things go wrong and you do incur charges, you need to show it wasn't your fault that the debit went through.

Help

If things do go wrong, make sure you use the Direct Debit Guarantee.

If a debit has been taken from your account without your authority, you are entitled to an IMMEDIATE refund form the bank irrespective of whose fault the problem was.

Call our helpline for more information.

Post Dated Cheques

Post-dated Cheques are where you pay over a period by providing several cheques which are dated weeks or months in advance.

Of course you know that the bank have to check the date and signature on all cheques.

You know that the person or organisation to whom you have given the cheques would not submit them all at the same time..

But believe us that you do NOT want to have to sort out the confusion your affairs will be in if all those cheques are processed at once through someone's mistake. Yes, you would get the money back - eventually.

If things do go wrong -

Don't Panic!

Get a list from your bank of all the Direct Debit and Standing Order recipients on the account.

Write to the firms who were not paid (or everyone you have arrangements for if necessary) to explain that there has been a problem which is being sorted out. Ask them to bear with you while this happens.

Find out from the bank what happened, and sort out an arrangement with them to cover the next few weeks while things get back to normal.

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