Glossary

Direct debit

By Fredrik Filipsson, cofounder of Business Bank Index
Reviewed by Morten Andersen
Definition

A direct debit is an instruction a customer gives once that lets a named business collect agreed amounts from the customer account on agreed dates, with notice of changes.

Information as of 13 February 2026Last reviewed 13 February 2026

General information, not financial, legal, or tax advice. Verify current terms and eligibility with the provider before applying.

A direct debit is an arrangement where a customer authorises a business to collect payments directly from the customer bank account. The customer signs a mandate once, and from then on the business pulls the agreed amounts on the agreed dates, giving advance notice of the amount and any change. It is widely used for recurring payments such as subscriptions, utility bills, and loan repayments, and the customer keeps protections that allow a payment to be cancelled or refunded.

How a direct debit works

A direct debit is set up when a customer signs a mandate that authorises a named business to collect payments from the customer account. The mandate records details such as the customer name, account, and the terms of collection. Once it is in place the business initiates each payment, choosing the amount and date within what the mandate allows and giving the customer advance notice. The payment is then pulled from the customer account through a clearing system. The schemes and timelines that handle direct debits vary by country, current as of 13 February 2026.

Mandate and notice

The mandate is the customer one time authorisation, and it sits at the centre of a direct debit. Because the business controls the amount and date, schemes require the business to tell the customer in advance about the payment and to give notice of any change to the amount or date. The customer can cancel the mandate with the bank at any time, and consumer schemes provide a guarantee that lets the customer claim a refund of a payment taken in error.

Bacs, SEPA, and other schemes

Direct debits run through different schemes depending on the country and currency. In the United Kingdom the Bacs scheme handles direct debits in pounds sterling on a three working day cycle under the Direct Debit Guarantee. Across the single euro payments area the SEPA Direct Debit scheme handles collections in euros, with a core variant that gives consumers a refund right and a business to business variant for company payers. A business that collects by direct debit should confirm the scheme, currency, timelines, and any fees with its bank or payment provider.

Frequently asked questions

What is a direct debit?
A direct debit is an instruction a customer gives once that allows a named business to collect agreed amounts from the customer bank account on agreed dates. It is widely used for recurring payments such as subscriptions, utility bills, and loan repayments.
How is a direct debit different from a standing order?
With a direct debit the business controls the amount and date of each collection, within the mandate and with notice of changes. With a standing order the customer sets a fixed amount and schedule and can change or cancel it directly. A direct debit suits variable recurring bills, a standing order suits fixed regular payments.
What is a direct debit mandate?
A mandate is the one time authorisation a customer signs to let a named business collect payments from their account. It records the customer and account details and the terms of collection, and it stays in place until the customer cancels it with their bank.
What schemes handle direct debits?
Direct debits run through country specific schemes. In the United Kingdom Bacs handles direct debits in pounds sterling under the Direct Debit Guarantee, and across the euro area the SEPA Direct Debit scheme handles collections in euros. Timelines and protections vary, so confirm the scheme and terms with your bank or payment provider.

Definitions, fees, features, and eligibility change and vary by region. This page was last reviewed on 13 February 2026. Confirm current terms with the provider before applying.

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Standing orderGlossary term Payment mandateGlossary term BacsGlossary term SEPA paymentGlossary term Direct creditGlossary term All glossary termsGlossary Compare providersBanks