Direct debits can be used for any monthly payment. This can be anything from paying off your credit card debt to a phone bill, even a car loan.
Setting up a direct debit is the complete opposite to setting up a direct deposit. With a direct deposit you are authorising money entering the account from another account on a certain day, a direct debit is authorising money to leave an account. This can be your low APR credit card account, or your personal current account. It doesn’t matter.
There are two common methods to authorizing payments. The first method is the owner of the account simply has to authorize the collector to get the money from his or her account – normally by phone or e-mail. The second method to do so requires the owner of the account to instruct his or her bank to allow the debit to happen from the collector. After the debit has been collected, the account owner is then notified by phone and e-mail how much has been debited, as well as the time the debit took place and the name of the collector.
To get your bank to allow your debt collectors to collect via direct debit, all you have to do is set up a meeting with someone who has the authority to do so in your bank and let him or her know how much you would like to allocate for your direct debit payments, and how much money you would like to have in the account for the bank to refuse direct debit. For example, if you don’t have enough to pay for the debt, you can have your bank decline the payment.
People who are short on time and busy with work and their other schedules often find direct debit to be extremely time saving – instead of spending an hour or more to pay a debt, you can simply pick up a phone call, or via online banking to authorize the payment.
There is even a quicker way of payment which can actually be set up automatically on a monthly basis. The way it work is for example if you use your cashback credit card for all your shopping to get the advantages of money back, you can simply set up a direct debit through your current account and avoid the hassle of missing a payment, paying over the phone, going on your online banking or even visit a branch.