Direct debit banking is a convenient and relatively inexpensive tool that many people use to make their bill payments and deposits to several other savings accounts.

Many banks offer direct debit banking.

Direct debit banking requires you to leave instructions with your bank to make a regular payment of a fixed sum to a designated account.

You can only make use of direct debit banking if you already have money in one main account that allows you to set up a direct debit payment to one or more accounts at other organizations.

Salary deductions are even better than direct debit banking because they allow you to make payments for free.

However, some persons would rather not use this option because:

  1. They prefer that their companies not know what their salary is being spent on.
  2. Their companies have a reputation for being tardy with payments to selected accounts. Especially where the required payments are for loans, this can cause interest to increase or late payment fees to be added on to the loan payment.

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Where possible, some people send their salary to one main account and then conduct their private business from that account. Persons who live in a country that is different from the one in which they have to pay their bills will face a problem, as it is not usually possible to set up direct debit banking from overseas if your bank does not allow this online.

Advantages of using direct debit banking:

1)      You save on transportation. Instead of having to drive, or take the train, bus or subway to a certain location to deposit savings, you can have it done automatically.

2)      You save on time by using direct debit banking instead of having to rush out during your lunch time or use time you could have spent preparing for an important presentation or hurrying to meet a deadline.

3)      You take away the temptation of having extra money on hand to spend. Once you send cash away to an account that doesn’t have a debit card, you’ll be less able to use it on impulse buying.

4)      You save on stress. It’s one, or three, or five less things to have to think about doing every month. Many people use direct debit banking to pay their utility bills and insurance payments.

5)      You save on the late payment fees and extra interest you might sometimes have incurred by not remembering to make a payment.

Image by Kai Hendry via Flickr

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