A banking instruction that automatically collects a recurring payment from a customer’s account is called a direct debit.
In a direct-debit arrangement, the customer authorizes a company or organization to request payments from the customer’s bank account. The recipient initiates each collection, which makes the method useful for bills such as utilities, insurance, subscriptions, and loan repayments.
Direct debit differs from a standing order. With a standing order, the account holder instructs the bank to send a usually fixed amount on a set schedule. With direct debit, the recipient normally controls the timing and amount within the authorization and applicable consumer-protection rules.
The details vary by country. The United Kingdom, for example, operates the Bacs Direct Debit system and provides a Direct Debit Guarantee. In other countries, similar account-to-account collection systems use different names and legal procedures.