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Need a little help getting your bills under control?
If you want to pay regular bills out of your bank account
there are two main ways to go about it - Direct Debits
and standing orders.
Direct Debits are used to pay bills where the amount can vary from month to month,
like your gas bill or your monthly mortgage repayment.
When you set up a direct debit you're giving a company permission to take money from
your bank account.
The company can collect however much you owe them but they have to tell you in
advance how much they'll take
and when they'll take it. Let's take your gas bill as an example.
If you set up a direct debit your provider will look at how much gas you
use over the whole year
and work out what they think your monthly payment should be.
They'll normally ask you to choose the date when you'd like the money to be taken
out if your account.
It's a good idea to choose a date a few days after you've been paid.
They might ask you to sign a form and send it back to them,
or they may be able to set it up online or over the phone instead.
It's free to set up a Direct Debit. It might even save you money if the company
offers a discount for paying this way.
And because it's backed by guarantee, if anyone makes a mistake,
like taking the wrong amount, you can get an immediate refund from your bank.
So what about standing orders? Standing orders are used for regular payments when
the amount is the same
each month - things like your rent or monthly payment into a savings account.
With a standing order you tell your bank to pay an exact amount of money to
another person or company
on a set day. You control the amount that's paid
and when it's paid.
Let's take paying your rent is an example. To set up the standing order
you need your landlord's account number and sort code. Then you tell the bank how
much to pay your landlord
and how often. You can do this online or by filling in a paper form.
Just like with Direct Debits, standing orders are free
but you have to make sure you give the bank the correct details.
If you get even one number wrong and the payment goes into the wrong account,
there's no guarantee you'll get the money back. Be wary of any company that
asks you to set up a recurring payment rather than a direct debit or a standing
order.
These are especially common with loan companies who ask for the long number
across the front of your card.
You won't be able to control the amounts that the company tries to take,
or the dates when they take the money. And you could end up paying a lot in
fees and charges.
For more about choosing the right type of account
and using it to make budgeting easier, watch our other videos
and go to our website.