Setting up a direct debit is one of the easiest ways to make sure your regular bills get paid on time. Instead of remembering each due date, you give the business permission to take the payment from your account automatically. Here is how to do it properly, so your first payment goes through without any surprises.
Quick answer: To set up a direct debit, give the business your BSB, account number and account name, then sign or accept a Direct Debit Request that states the amount and how often it will be taken. The business then withdraws each payment on the agreed dates until you cancel it. For the official government guidance, see MoneySmart’s guide to direct debits.
What Is a Direct Debit?
A direct debit is an automatic payment from your bank account to a business or service provider. You authorise the business once, and it pulls the agreed amount from your account on the agreed dates. Direct debits are commonly used for:
- Electricity, gas, water and internet bills
- Rent and mortgage repayments
- Insurance premiums
- Gym memberships and subscriptions
- Phone plans
The amount can be fixed, like $60 a month for a gym membership, or variable, like a quarterly power bill that changes with your usage. It can come out on set dates or at regular intervals, such as weekly, fortnightly or monthly.
What You Need Before You Start
Have these details ready before you begin. You will find them in your banking app or on your bank statement:
- Your BSB: the six-digit number that identifies your bank branch.
- Your account number: the number of the account the money will come from.
- Your account name: exactly as it appears on your statement, including all joint account holders if it is a joint account.
- The payment details: how much will be taken, and how often.
Double-check every digit. A single wrong number can send the request to the wrong account or cause the first payment to fail. If you are setting up a recurring payment from a card instead of a bank account, you will need the card number, expiry date and security code instead.
How to Set Up a Direct Debit: Step by Step
Step 1: Choose bank account or card
Most businesses offer two options. A bank account direct debit uses your BSB and account number and runs through the Bulk Electronic Clearing System (BECS). A recurring card payment charges your debit or credit card. The bank account option is the classic direct debit, and it is usually the better choice for regular bills, because it keeps working even when your card expires or is replaced.
Step 2: Pick how you will sign up
Most businesses let you set up a direct debit in one of these ways:
- Online: log in to your account on the business’s website or app, go to Payments or Billing, and select Direct Debit as your payment method.
- Paper form: fill in a Direct Debit Request form, which the business provides. Some businesses still ask you to print, sign and return it by post or email.
- Over the phone: give your details to the business’s billing team, who will set it up and send you written confirmation.
The online option is fastest, but the details you provide are the same either way.
Step 3: Enter your bank details
Type in your BSB, account number and account name carefully. On a paper form, write clearly and check each field before you sign. If it is a joint account, use the full account name as shown on your statement.
Step 4: Set the amount and timing
Confirm whether the amount is fixed or variable, and on which dates the money will come out. If the amount varies, you will need to check each bill before it is debited, so you know you have enough money in the account and the business has taken the right amount.
One handy tip: if you can choose the date, set the debit for the day after payday. That way you know the money is there when the payment comes out.
Step 5: Read the Direct Debit Request and service agreement
Before you accept, read the agreement. It should state the amount or how the amount is worked out, the payment dates, how much notice the business must give you before changing the amount or dates, and how to cancel. If anything is unclear, ask the business before you sign, not after the first payment has left your account.
Step 6: Submit and keep the confirmation
Once you submit the form or accept the agreement online, the business should send you confirmation, usually by email. Keep it. It is your record of what you agreed to, and you will need it if a payment ever goes wrong.
Step 7: Check the first payment
Watch your account around the first due date and confirm the payment came out for the right amount. Traditional direct debits are processed in batches through the banking system, so allow a few business days for the first payment to be set up and processed. If the first payment does not appear when expected, contact the business straight away rather than waiting for a second missed payment.
Direct Debit vs Recurring Card Payment vs PayTo
These three options look similar, but they work differently:
- Direct debit (bank account): uses your BSB and account number. You can cancel it through your bank as well as through the business.
- Recurring card payment: charges your debit or credit card. To stop one, you generally need to contact the business directly, and you must update your details with every merchant when your card is replaced.
- PayTo: a newer account-to-account payment option. You approve the agreement in your own banking app, and you can pause or cancel it there. It is still being rolled out, so not every business offers it yet.
Mistakes to Avoid When Setting Up a Direct Debit
- Using the wrong account: make sure the account you nominate will actually hold enough money on the debit dates.
- Typing the account name wrong: use the exact name on your statement, not a nickname or shortened version.
- Ignoring variable bills: if the amount changes, check each bill before the debit date.
- Forgetting about it: review your direct debits every few months and cancel any you no longer need.
- Running low on funds: if there is not enough money in your account, your bank and the business may each charge you a dishonour fee, and the payment may still be owed.
- Not updating details when you switch accounts: if you change banks or accounts, tell every business with a direct debit in good time before the next payment date, or make a one-off payment to cover the gap.
What If a Payment Goes Wrong?
If a payment comes out for the wrong amount, or after you cancelled, contact your bank and the business straight away. Keep your confirmation email and any bills, as these show what you agreed to. You can also ask your bank for a list of your direct debit arrangements if you have lost track of them.
And if you ever need to stop a direct debit, the process is simple. See our guide: How to Cancel a Direct Debit: A Simple Step-by-Step Guide.
Frequently Asked Questions
Can I set up a direct debit from a savings account?
In most cases, yes, as long as the account accepts direct debits. Some accounts, such as certain term deposits, do not. Check with your bank if you are unsure.
How long does it take to set up a direct debit?
The form itself takes only a few minutes. Allow a few business days before the first payment, so the business and the banking system have time to process the request.
Can I change the date or amount later?
Usually, yes. Contact the business to change the amount, date or account details, and do it well before the next payment date so the change takes effect in time.
What happens if I change banks?
Your old direct debits do not move automatically. Go through your statements, list every recurring payment, and set each one up again with your new account details before closing the old account.
Is a direct debit safe?
Yes, provided you only set them up with businesses you trust and you check your statements regularly. Never give your bank details to a business you do not recognise, and review your direct debits often so nothing slips through unnoticed.
