Thinking Money | Free Financial Advice and Tips

Standing order or direct debit – which is the best current account option?

Posted on 17. Jan, 2011 in Saving money

When you are looking for the best current account facilities available, one thing that is likely to come up time and again is the ability to set up Direct Debits and standing orders. Both represent a convenient way to help manage your finances and pay bills, but deciding which is right for you might not be as simple.

Of course, if you’re looking to ensure utilities, broadband, mobile phone and subscription television fees are paid on time then there are multiple other options available. Some companies allow you to pay over the counter at the Post Office, while others accept special payment cards that can be used at designated outlets. The problem some people might have with these, however, is that it takes time out of your day and is seemingly just one more thing that needs to be added to your extensive list of things to do.

This is where Direct Debits and standing orders really come into their own, as once they have been set up the money is taken from your account and the third party is paid on time. The whole process is automated so you should never have to worry about being chased about missed payments – provided, of course you have sufficient funds in your current account to pay the bill – and any funds taken will be detailed on your statements.

However, as the two facilities are so similar, there is often some confusion about how they differ. Both are basically an instruction to your bank to make a payment to a third party on what is usually a regular quarterly, monthly or weekly basis – although they can also be arranged to be more flexible . The only real difference comes down to how they are managed and how much they cost. A Direct Debit will often be the favoured option by companies as they are cheaper to operate. Therefore, some offer discounts to customers who choose to pay this way. Of course, both options are free for the account holder to set up, but as standing orders need to be verified by the bank it can often take longer for the funds to be completely transfer.

Therefore, although the differences between Direct Debits and standing orders may seem small, there are savings to be made. So, having a current account that offers the ability to set up both might be the best option. In addition, if the facility also has an arranged overdraft you may find that even if your account is in credit, the money can be taken without you having to incur any charges. Of course, this will depend on the individual provider, but may offer you just one more reason to consider switching bank accounts sooner rather than later.