What is direct debit and what is it for?

Direct debit is a concept you’ve probably already come across when paying bills. But do you know what exactly it means? Because many people regularly confuse it with a standing order. And while the two options share a number of common features and characteristics, they work very differently. So what is direct debit and what is it for?

What is direct debit?

Direct debit is one of the basic services provided by all banks and other financial institutions today. It is a process whereby funds are automatically withdrawn from debtors’ accounts on the basis of a mandate from the client. These are then credited to the creditor’s account.

Because direct debit is automatic, you can fully rely on it to pay your debts without the risk of forgetting to send the money in any month.

Direct debits can be used for all financial obligations, including loans and invoices. Setting it up is quick and easy. The whole process usually depends on the bank where you have an account or the financial company where you plan to use the direct debit service.

Direct debit vs standing order

At first sight, a direct debit resembles a standing order. However, it has several differences. The biggest one is that with a standing order, the same amount is taken from your bank account at regular intervals (for example, every month) and sent to the recipient’s account.

In the case of direct debit, the amount may vary as you do not determine the amount of the payment. This is done by the other party to whom you owe money, called the debt collector.

At the same time, keep in mind that you are not the one sending the money from your account to the debt collector. He withdraws it himself. But there’s nothing to worry about. The debt collector doesn’t have the same access to your bank account as you do. Therefore, you can be sure that your finances are safe.

Advantages of direct debit

Direct debit has several advantages for both parties. In the case of the debtor these are:

• reduces the risk of forgetting to pay a fee or instalment,
• makes it easier for you to function on a daily basis,
• its setup is simple and quick.

The advantages for the lender include:

• guarantees a regular flow of funds,
• makes debt collection more efficient,
• allows you to keep track of the status of receivables and any payments that have been made.

In which areas can direct debit be best used?

The service is great in situations where you pay something regularly, but the amount is not always the same. Instead of constantly reminding yourself that you have to pay the debt, you simply set up a direct debit for it.

And in what areas do people use direct debit most often? As a rule, these are:

• gas, electricity, heating,
• Phone,
• Insurance,
• Education,
• meals in factory or school canteens.

Early collection of debts will help in recovery

In addition to the classic direct debit, we also know the so-called. early. This is an excellent solution when you think that the client will not pay your invoice or has not actually paid it. This is primarily a service of call centres such as Credit Call, which have a team of experts ready to deal with the whole unpleasant situation for you.

Early collection is part of a long and time-consuming process debt collection. It is the first step that precedes out of court and then judicial recovery. It is characterised by the fact that it takes place in two phases:

• Contacting shortly before the due date (2 to 3 days) – the call centre finds out whether the debtor will pay the invoice on time and accurately.
• Contacting shortly after the due date (7 to 14 days) – to find out why the debtor has not paid the invoice.

Credit Call always acts on your behalf for the Early Collection Service. This means that the debtor is unaware that a third party is contacting them.Once the cause of the non-payment is identified, the call centre staff come up with practical solutions that could resolve the situation. They usually propose a repayment plan or enter into an acknowledgement of liability with the debtor.