Sep 23, 2019

Can I set up Direct Debits from all my accounts and credit cards?

Direct Debits are an excellent way for customers to make recurring payments for goods, services and subscriptions. In this blog post we consider a question we are frequently asked by payers, namely whether a Direct Debit can be set up from any UK banking account or credit card.
 

 

Direct Debits can be set up on almost any UK current account, whether it’s with a high-street or digital bank, or even building society.

Direct Debits cannot, however, be set up against savings accounts, such as fixed term savings accounts and ISAs, or mortgage accounts.

They also cannot be set up from a credit card. Instead, regular credit card payments can be made using a ‘Continuous Payment Authority’ (CPA). Similar to Direct Debit, CPA is an automatic, regular payment method that can vary in amount and frequency. However unlike Direct Debit, a CPA doesn’t give consumers nearly so much protection from rogue companies and fraudulent payments. Here are some of the key differences between a Direct Debit and a CPA.

 

1. The company can make changes without telling you

A company can change a CPA date and amount without telling payers. Direct Debit requires that a company gives payers advance notice before any such changes are made.

 

2. CPAs offer no protection

A CPA doesn’t offer payers any protection, leaving them exposed to disreputable companies. Conversely, Direct Debits are protected under the Direct Debit Guarantee, which means payers will receive a full and immediate refund from their bank if they lodge an indemnity claim. Organisations are also protected against fraudulent indemnity claims.

 

3. CPAs give instant access to your funds

A Direct Debit Instruction can take a couple of days to set up and funds cannot be taken immediately by the organisation. Conversely, CPAs can be set up right away once payer card details are provided, which means funds can also be taken immediately.

 

4. CPAs aren’t transferred automatically

Direct Debits are automatically transferred when consumers switch current account but CPAs are not. This means payers might find companies trying to take a payment from a card they no longer have. This can negatively impact their credit rating.

 

5. CPAs are harder to cancel

To cancel a Direct Debit, a consumer simply notifies their bank. Cancelling a CPA requires speaking to the card provider or tracking down the relevant contact within the company.

 

Organisations using the Direct Debit Scheme are carefully vetted before they’re authorised by their sponsoring bank and given a service user number (SUN) or sponsored by a Direct Debit bureau for a facilities managed service. This gives peace of mind to consumers that their payments are in safe hands and that they are not exposed to any unscrupulous companies.

If you’re interested in the other benefits of Direct Debit over credit cards for recurring payments, have a read of our blog posts from the perspectives of both consumers and organisations.

 

SmartDebit offers both a bureau service for organisations with their own SUN and a facilities managed service for organisations unable or unwilling to obtain a SUN. Contact Us to find out more.

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