Tuesday, 19 March 2013

Payment Methods and What You Should Know - Standing Orders

This post is the fourth in my Payment Methods and What You Should Know series.

Standing Orders

These are the best method to use for regular scheduled payments, simply because it is a kind of payment that is directly, and completely under your control. They are also very similar to direct payments, in that, they will be set up by yourself on your bank account, and initiated by you for the amount you choose, on the date that you choose. The third party you are paying will have no involvement at all, beyond providing you with a reference number to put against the payments.

From this you can glean two things. One is why companies favour direct debits as their prefered method of payment - they can take what they want, when they want, rather than trust you and wait for the payment to show up.

Secondly, why they are one of the best payment methods for keeping your money under control. You can set up, amend or cancel standing orders very simply and quickly, over the phone, on the internet, in person, or in writing if you really prefer. Furthermore, there's no confusion, or asking for special terms you might not understand, and if a payment leaves your account, it's because you have actually authorised it.

It's good to use this method to pay for as many of your bills as possible. That way, you can time payments to always go out of an account on a date a couple of days after payday when the money's definitely going to be there. Also, doing it this way, everything left in the account after that date is yours. No worries, no fuss, and no remembering to keep certain amounts set aside for bills x,y, and z on various dates throughout the month.

Like direct payments though, you need to be very, very careful inputting details. Again,  because the payment is directed and initiated by you, any error is likely to be caused by your miskeying, and therefore unlikely to be covered by the bank if it does go wrong.

It is also worth remembering that you can still be charged by your bank if you do not have the required money in your account when a payment falls due. In order to avoid this, keep track of your payments and your account balance. This is fairly easily done as your internet banking should have a page where you can check how many standing orders you have, who they are payable to, when and how much.

If need be, you can always cancel the standing order to prevent any charges, although most banks will require at least 1 day's notice to do this. You will also need to make a note of the details if you wish to set up the same payment again in the future, as the bank will not store these details for you.

4 comments:

  1. Without doubt, standing orders are preferable for regular payments. You can set up monthly (or whatever intervals you want) payments and then you don't have to worry about forgetting them. You can also set an end date if required, so you don't risk making too many payments. As you said, standing orders have an advantage over direct debit as customers, and not businesses, are in-charge.

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    1. I'd forgotten about being able to specify an end date. It's a very handy feature, and can prevent overpayments.

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  2. I have some real horror stories with direct payments. I was still paying the balance on a Bank of America card when the account was closed down. When it was time to switch banks, I couldn't cancel the payment! They wound up overdrafting my account by several hundred dollars before I was finally able to get it straigtened out.

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    1. That's worrying Edward, although I think what you call direct payments is different to what we have in the UK. It wouldn;t surprise me though if the whole thing became one worldwide in our lifetime though.

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