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Debit orders are a cheaper way to payKNOWING the difference between a stop order and a debit order can save you money - and spare you inconvenience. Bank debit and stop orders are commonly used methods of paying regular expenses, but few customers realise debit orders are a lot cheaper than stop orders. The one downside of paying by debit order, though, is that you have no control over how much the beneficiary is paid. In the December 1997 edition of the You and Your Bank newsletter, Standard Bank explains the difference between debit and stop orders, and highlights the advantages and disadvantages of each payment method. Debit order A debit order involves you authorising a third party (the beneficiary) to regularly debit your account. The amount debited may, however, be adjusted by the beneficiary. When, say, your insurance premium increases, the beneficiary (the insurance company) will automatically amend the debit order, and only then inform you in writing. The contract of payment is between you and the beneficiary - the bank merely facilitates the transaction by allowing the debit order to go through your account. If you cancel the debit order you have to notify the beneficiary. Any dispute must be resolved between you and the beneficiary.
Standard Bank says debit order beneficiaries are screened thoroughly and only reputable companies are allowed to process debits through a customer's account. Standard Bank charges R2.30 or R2.50 for a debit order payment. Stop order If you make a payment by stop order, you instruct your bank in writing to debit your account with a specific amount regularly and to credit the account of the beneficiary. The contract in this case is between you and your bank. To cancel or amend the stop order you must notify your bank. A stop order costs more than a debit order because the bank has more administration work. Standard Bank charges R4.50 for a stop order payment. Which to use? The beneficiary is often the deciding factor on whether a debit order or a stop order is appropriate. While debit orders are cheaper than stop orders, they can be used only where the beneficiaries are authorised by your bank to use the debit order system. Companies on the debit order system will usually not accept payment by stop order.
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