A standing order is a financial instruction set up by an account holder with their bank to make regular, fixed payments to another bank account.
It’s a way to automate recurring payments, ensuring they are made on time without the need for manual intervention each time a payment is due. Standing orders are commonly used for routine payments, such as rent, utility bills, subscriptions, or transfers into savings accounts.
Key Features of Standing Orders:
- Fixed Amount: The amount of money transferred is fixed and does not change from payment to payment, unlike direct debits where the payment amount can vary.
- Regular Schedule: Payments are made on a regular schedule determined by the account holder. This can be weekly, monthly, quarterly, etc., according to the payer’s needs and the agreement with the recipient.
- Payer Control: The account holder (payer) has full control over setting up, modifying, and cancelling the standing order. They decide the amount to be paid and the frequency of payments.
- Automatic Payments: Once set up, the payments are made automatically on the scheduled dates until the account holder decides to stop them or the set end date is reached.
How to Set Up a Standing Order:
Setting up a standing order typically involves the following steps:
- Recipient’s Details: The account holder needs to provide the bank with the recipient’s bank account details, including the account number and sort code, and, for international payments, the IBAN or SWIFT code.
- Payment Details: Specify the amount to be paid, the frequency of payments (e.g., monthly), and the start date. Sometimes, an end date is also set, after which the payments will stop automatically.
- Authorization: The account holder authorizes the bank to make these payments on their behalf. This can often be done through online banking, a mobile app, or in person at a bank branch.
Advantages of Standing Orders:
- Convenience: Automates regular payments, reducing the effort and time spent on manual payments.
- Reliability: Ensures payments are made on time, helping to avoid late payment fees or missed payments.
- Control: Since the payer sets the amount and frequency, they have significant control over their finances and can easily adjust or cancel the standing order if their situation changes.
Considerations:
- Fixed Payments: Because the amount is fixed, standing orders are not suitable for bills that vary each month, like credit card payments or utility bills based on consumption.
- Balance Management: The account holder must ensure there are sufficient funds in the account to cover the standing order payment to avoid fees for insufficient funds.