How Do I Choose the Best Direct Debit Account?

A direct debit account is a checking, savings, or credit account that can be authorized to automatically pay certain bills or debts. In order to choose the best direct debit account, it is important to find out about account charges, reward schemes, and services such as overdraft protection. Most importantly, a good direct debit account will come from a financial institution that has an excellent reputation for customer service and fair dispute resolution; since serious errors are possible when using a direct debit account, it is important to have a bank willing to work out problems without a lot of hassle.

Certain credit or debit accounts charge fees for particular transactions. While nearly any type of checking, savings, or credit account can be set up for direct debits, it is important to avoid using direct debit schemes on an account that charges transaction fees. If an account charges transaction fees, an account holder will end up paying extra every time a direct debit goes through. Even if the fees are relatively low, if a person pays multiple monthly bills through direct debit, the charges can quickly add up.

A direct debit account can be used to stock up points toward account rewards plans. Some credit accounts award points for every dollar spent on a credit card, including for direct debits. For people in the habit of paying off their credit balance every month, this can be a way to quickly stockpile points toward rewards such as cash back, airline tickets, and other rewards. It is important to read reward plan rules carefully to make sure that direct debit transactions count toward reward totals

While some monthly direct debits will always be the same amount, others, such as utility bills, may vary from month to month. In case a high-variable month coincides with a lower-than-normal income month, it is important to have overdraft protection on a direct debit account. Overdraft protection prevents a payment from bouncing back, which in turn can prevent credit score damage. Though many financial institutions charge a small fee for overdraft protection, some will excuse this fee the first time an overdraft occurs. A direct debit account with overdraft protection can be a lifesaver in the event of an emergency.

In general, the direct debit process is a smooth, easy way to handle bills. Since no process is fully foolproof, however, it is important to have a direct debit account at a financial institution that can be trusted to quickly and efficiently sort out errors. Read business bureau ratings or customer reviews of local banks before opening a direct debit account to ensure that, should problems occur, the bank will be a help rather than a hindrance.