Personal Finance - Other
dollar sign

Advantages and Disadvantages of using Direct Debit to Pay Bills

dollar sign
Steven Mars's image for:
"Advantages and Disadvantages of using Direct Debit to Pay Bills"
Caption: dollar sign
Image by:

Authorizing a payment to a company through a bank is called direct debit financing. It is similar to direct deposit, but it is a payment instead of a deposit. It is easy to set up an authorization using direct debit.

It can be any kind of a bill including a gas bill, electric bill, cable television bill, etc. It can be one time or recurring. A recurring payment can be every 30 days, 60 days, or any length of time between payments. The payment can be made from a checking account or a savings account. A credit card can also be used

for the authorized payments.
The payment amount can be specifed or it can be authorized for the

total amount of the bill to be sent before the due date.

One advantage is paying by direct debit does not require any paper, making it cheaper. Another advantage is the payment is made automatically to whoever the payment is made to. Some money is

saved because stamps do not have to be purchased. Also, some companies give discounts to customers

using direct debit. Any transactions not yet made can be canceled if advance notice is given, usually 24 hours. Late fees are eliminated because the transaction is usually done instantly. A lot of time is saved because filling out the bill and mailing it is not necessary after setting up a recurring payment. The most convenient way to authorize a direct debit is online. The record of the transaction is proof of payment.

Using direct debit is convenient, safe, and reliable. Payments can be made to any company no matter

How far or near. Also there is not any worry about receiving a bill in time to make payment.

One disadvantage is if there is not enough funds in an account to pay a direct debit authorization, it will

bounce and not be paid.
Another disadvantage is any unexpected expenses will not be taken into account when the direct debits for the month are made. This must be taken into account when

the direct debit authorizations are set up. Also if a customer does not receive what he has bought,

the direct debit transaction might have already been made. The bank or credit card company might

make a mistake when the direct debit payment is made. This could cause an account to be overdrawn,

making it impossible to withdraw any money or pay any other bills. The bank will not refuse to pay the

money back if the overpayment is their fault.


More about this author: Steven Mars