Direct debits are automatic transactions which involve the withdrawal of money from one bank account so that it can be transferred to another by means of payment. They are usually used to make the process more convenient when it comes to regular and frequent transactions.
As a result, many consumers set up direct debits for their utility bills. This can be the easier and less time-consuming option when compared to the alternatives, which may include making cheque, credit card, internet transfer or Post Office payments.
However, there are a number of advantages to setting up direct debits, especially for people experiencing financial hardship.
Direct debits can help you budget
One of the main benefits of this payment method for people who have money troubles is that it can help you to budget. By better organising your finances, you may be able to avoid falling into debt, or make savings that allow you to tackle existing arrears.
Most companies, such as your gas or broadband provider, will allow you to choose a specific date on which the charge will be taken from your account. Setting the transaction as soon as possible after your payday or income date is recommended.
This way, you can ensure that your essential costs are taken care of immediately, when you have the most money in the bank. As a result, you don’t have to worry about leaving a certain balance for a bill that is coming at a later date.
Ensuring that your obligatory payments are taken care of before you have a chance to spend on luxury items means you’re less likely to make splurges you can’t afford. You will know exactly how much you have left to budget for the rest of the month.
Pay off your debts or accumulate savings
Direct debits are an excellent way to pay off debts or make savings. People who could feasibly make a contribution to one of these goals each month often do not have the self-discipline to make the transfers, and end up spending the funds unnecessarily.
Determine what you could realistically allocate to combat arrears or to a savings account, and set up a direct debit for this sum to be automatically transferred from your bank account and to the appropriate destination straight after pay day.
This way, you will have no choice but to avoid those tempting purchases later in the month. Especially if you’re on a debt management plan or saving for a particular purpose, such as a mortgage deposit, you’ll be far happier knowing the funds have gone to these purposes.
Avoiding late payment fees
Setting up direct debits for bills that you are obliged to pay each month is a good tactic for avoiding late payment fees. The charges you incur when you forget to make payments or realise you don’t have enough funds left at the end of the month can be huge.
If you are using a credit card to earn cashback or to take advantage of a rewards scheme, then it is absolutely essential that you set up a direct debit to avoid interest charges. Setting one up for minimum debt repayments is also crucial for avoiding expensive fees.
The potential for discounts
Some organisations may provide you with a discount if you set up a direct debit, since this provides them with additional security that you will pay up in time each month. Make sure to speak to your utility providers about the options available.
What to be aware of
There are a number of advantages to setting up direct debits, and sometimes they are unavoidable with particular services, but you should always be aware of the potential risks to ensure you do not encounter financial problems.
It is vital that you ensure you will have adequate funds at the time when direct debits are taken from
your account, since failing to do so could land you with a fee from the organisation due to the bounced payment, as well as overdraft fees and other charges from your bank.
You must also keep a close eye on the funds that are being taken from your account to ensure they are correct. It is easy to forget about a direct debit that you set up for a gym membership last year, and end up paying for a service that you no longer require.
Always check your statements and get in touch with your bank if you have any queries, ensure you receive confirmation for any direct debit cancellations that you request, and update all parties involved if any of your details change.
Stef uses her past experience of debt problems to write personal finance advice articles to help others avoid getting into debt and having to go to a company such as http://www.debtfreedirect.co.uk/ as she did.
Direct debit Collection is the best for any kind of payment, that can be done without visiting bank with just account number n sort code.
Back on Track Loans you will find free information providing you with info and solutions to help you deal with your debt and credit problems. When you are ready, one of our advisers is waiting to speak to you about debt help advice.
Thanks for info.Its really nice and helpful.I have check one site called Back on Track Loans its UK site.They also provide good information.