There is confusion surrounding standing orders and direct debit because they both are automatic payment methods and they share a number of similarities. This can make it difficult for people to distinguish between the two. But, there are some significant differences that you need to understand if you are planning to use either of the two methods for your payments. Let’s check them out:
Standing Order
This involves setting up regular and fixed payments from your bank account. The customer chooses the amount and the frequency of a standing order and they can change it at any time.
Direct Debit
This is a way of making variable payments from your bank account by granting authorization to the recipient to collect the payment from your account directly.
Now that we have a basic idea of these two methods, it is time to ask one question; what is the difference between standing order and direct debit?
Who controls the payment?
In standing order, the payment is under the control of the customer as they decide the sum and fix a regular interval for making the payment like weekly, monthly or an annual payment. In a direct debit, the merchant will collect the money, which means they decide the amount and interval.
What are the costs?
Standing orders are usually collected free of costs, but there may be some additional charges, depending on the bank. There is a fixed fee associated with a direct debit or it can be a percentage of the total transaction amount.
How flexible is the method?
A standing order is relatively inflexible because it will have to be cancelled if you want to make a change to the timing and amount and set up a new one. On the other hand, you can enjoy a lot of flexibility with a direct debit as the amounts and timings can vary.