Direct Debit

With a direct debit, the customer gives permission to a company, such as an energy supplier, gym or insurer, to take money from their account. The company then collects payments as they fall due. Because the company initiates each payment, the amount can change, as long as the customer is notified in advance.

In the United Kingdom, direct debits are protected by the Direct Debit Guarantee, which entitles customers to an immediate refund from their bank if a payment is taken in error. In the euro area, the Single Euro Payments Area direct debit scheme provides similar protection and allows direct debits across countries.

For example, a household might pay its electricity bill by direct debit, with the amount varying each month based on usage, or its council tax in fixed monthly instalments.

Direct debits make regular payments convenient and help avoid late fees. Customers can cancel them through their bank. Similar arrangements in the United States are often called automatic payments, autopay or ACH debits.