Personal Finance: Money Q&A - Less control with direct debit

I have been making a regular monthly payment into an investment fund by standing order, but the company now insists I change to direct debit. Can it do this and should I be worried? I feel that standing orders give me more control.

AT, HEREFORDSHIRE

Standing orders do give you more control because the amount you pay can only be varied by your own action, ie. by you writing a new standing order. By contrast, direct debits give the organisation you are paying the right to take money from your account. But the money can be taken from your account only within the rules.

Crucially, you must be given at least 14 days' notice of any change in the amount or date of the debit. This gives you time to contact your bank and cancel the direct debt should you not like the new date or new amount. You do not have to be given individual notices if, for example, you receive a 12-month schedule of varying payments. That schedule is, in fact, your notice.

Mistakes do happen. But the direct debit guarantee says that you can tell your bank that a direct debit has hit your account outside the terms of the agreement. Your bank should then automatically re-credit your account until the matter has been resolved.

Unfortunately, the guarantee is the Achilles heel of what should be the perfect way to pay bills. Do not be put off by a bank official who refers your direct debit query to the debiting organisation and washes his or her hands of responsibility. Insist on enforcing the direct debit guarantee. Insist on a refund of any bank charges that might be the direct result of the direct debit. And make a formal complaint to the bank.

The system provides a cheap way of collecting money and can be convenient for the customer in the case of payments that vary. When it comes to making flat-rate monthly payments, the standing order is as convenient. But if your fund management company insists that you now pay by direct debit, you may have to comply, though do check the small print of the agreement.

Write to the personal finance editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, and include a phone number; or fax 0171-293 2096; or e-mail i.berwick@independent.co.uk.

Do not enclose SAEs or any documents you wish to be returned. We cannot give personal replies, nor can we guarantee to answer letters. We accept no legal responsibility for advice given.

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