Wednesday, 13 February 2013

Payment Methods and What You Should Know - Direct Debit

On the way home from work last night, I was chatting with a friend when the subject of monthly bills and banking came up.
It turns out my friend didn't realise Direct Debits are entirely controlled by the other party who bills him!
He's a bit older than me, so I was shocked.
Then I started paying a bit more attention to what some of my peers knew about basic banking, and where they stood with what - oh dear, oh dear, oh dear...!

So this is the first of a series of posts to do with everyday banking, and covers such things as payment methods, the rules regarding them, and personal bank accounts.

First of all, these posts are about UK banking, so some of it may, or may not apply elsewhere, but I'm sure the general advice is good.
There are a variety of ways of making payments from your bank, and they all work in slightly different ways, and more importantly, they have different ways of setting them up, controlling them, and cancelling.

Taking direct debits first then:

Whenever you sign up to a direct debit, at the bottom of the form is a copy of the direct debit guarantee that says 3 things, (in my own words).
  1. Any payments due, or any changes made to those payments, must be communicated to you at least 10 working days before the payment is taken.
  3. If an error is made either by your bank, or the corporate body claiming the payment from you, you are entitled to an immediate refund of the entire amount by your bank, no questions.
  5. A direct debit can be cancelled at any time by contacting your bank. Sometimes a written notification is required.
Firstly, taking point 1, basically an organisation has to tell you a couple of weeks beforehand when they'll take your money. This little fact can be used to your advantage sometimes to make paying for things easier. For example: you decide to pay by DD and the company you are buying from asks when you would like the payment to go out of your account. If you choose a date less than 14 days away, that payment won't be taken until the following month! The drawback though, is that they sometimes take double on that date to compensate, although they will tell you this if that's going to be the case.
Point 2 is a very important one, and one that people are often unaware of. Banks don't usually help this either, because it takes them time to reclaim money back from the other party. They will frequently fob off customers, often with excuses like - "You'll have to sort that out with xxxx company who debited you." Let's be clear: This is incorrect, the bank has to refund you, and then you are left to sort out the matter with the 3rd party directly.
In order to get a bank to play ball, you will often have to "remind" them about the direct debit guarantee, and ask them to do "an indemnity". The money should then be returned pronto, and you shouldn't be charged. Technically, the banks do not have to return any charges incurred although if you do this the same day the payment was taken, you should be OK. Otherwise, there are times when you can reclaim charges from the company who debited you, but they would have to admit their error first.
Last point, (3): Most banks are fine about cancelling a direct debit over the phone, or internet, but they are times when mistakes are made, and it's easy to see why:
Working in a call centre is a sh***y job, (I know, I've done it), and for one reason or another, (perhaps another call comes through before the operator has had a chance to implement the change?), stuff often doesn't get done. I do 3 things when using a call centre:
  1. If I'm not getting anywhere with the operator, (perhaps they are not listening properly), it's often better to hang up and ring back, until you get to talk to someone more competent instead. This may seem rude on the surface, but frankly it saves everyone involved stress and hassle.
  3. I call back again 10 minutes later to check my request has been carried out, because from experience, a significant amount of times, it hasn't been.
  5. Always make a note of the person you spoke to, the time and the date, because you can always request the call recording.
It's also good practice to write as well. Although this may not seem necessary, it gives you solid evidence to fall back on if things go wrong. Make 2 copies, and keep one for yourself, noting the date you posted it (which should be the same day).

Keeping all this in mind should help you out if you find that mistakes have been made on your Direct Debits and you're out of pocket because of it.

Next time: Direct Payments and Transfers


  1. It is surprising how many people don't know the difference between a Direct Debit and a Standing Order. The DD is more flexible but control of dates and amounts is put in the hands of the organisation that you're paying, whereas with SO you have total control, but much less flexibility.

    One minor point from your article: You state to quote an 'indemnity claim'; strictly speaking this is incorrect. You need to state that you want to reclaim under the Direct Debit Guarantee. The indemnity claim is what happens behind the scenes where your bank will reclaim indemnity from the organisation's sponsoring bank and subsequently the organisation's own bank account.


    1. Yes, I don't understand why people don't know the difference either, as it's quite important. I guess it's just widespread ignorance, which makes my next post about continuous card authorities all the more relevant, as many people are just not aware these exist, let alone that they may have one on their own card.

      Regarding the DD guarantee, you are right, although from experience working in customer service call centres, the word "indemnity" is often the trigger word that changes things for people, so I would still encourage people to use that term.

  2. I have a few direct debits through my bank. Not sure if we have these 3 rules written out in Canada as I usually don't read the fine print, but they seem like good guidelines for any bank to follow. Wicked you worked at a call centre. Great opportunity to improve a person's communication skills I would imagine :0) I heard some call centre representatives fancy getting the holiday shifts because they get paid more, but don't receive as many calls.

    1. Yes, I worked in several call centres including Barclaycard before they shipped the work over to India instead. And yes it has done wonders for my communication skills, but they are such cr*ppy places to work, I wonder why I put up with it for so long - apathy and lack of self confidence I guess. Still, I've climbed up the career ladder a bit now, so I don't do that anymore. Now I'm a marketing manager, which basically means I get to surg the internet all day...


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