> For the complete documentation index, see [llms.txt](https://docs.xft.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.xft.finance/learn/flows/payments/direct-debit-and-recurring-card.md).

# Direct Debit & Recurring Card

A debit transfer or <mark style="color:red;">"pull" payment</mark> is a transaction initiated by the <mark style="color:red;">receiver of funds</mark>, where the bank receives a payment request by the payee, and then sends the funds per request.

<mark style="color:purple;">USE CASES</mark>

* Utility bills
* Mortgages
* Check conversion

Debit = pull funds out of bank account, subscription bill pay

### What is Direct Debit?&#x20;

Direct Debit is a payment method where a customer authorizes a company to collect varying amounts directly from their bank account at agreed intervals. It's widely used for regular bills, [subscriptions](https://www.accesspaysuite.com/solutions/subscriptions/), and instalment payments.&#x20;

In the United States, direct debit usually means an Automated Clearing House (ACH) transfer from a bank account to a biller, initiated by the biller.

The problem of direct debit fraud is extensive according to research by Liverpool Victoria Insurance[<sup>\[21\]</sup>](https://en.wikipedia.org/wiki/Direct_debit#cite_note-21) which reveals that over 97,000 Britons have fallen victim to criminals setting up fraudulent direct debits from their accounts. An average of £540 goes missing before the customer notices. Direct debit payment fraud in 2010 accounted for around 10.6% of all identity fraud cases. The extent of direct debit scamming is set to grow to 41,000 cases a year by 2013, equating to a 57% rise.

[Settlement Proposed to Resolve Widespread Consumer Billing Issues by PPL Electric Utilities](https://www.puc.pa.gov/press-release/2023/settlement-proposed-to-resolve-widespread-consumer-billing-issues-by-ppl-electric-utilities)

### What are recurring card payments?&#x20;

Recurring card payments involve a customer permitting a merchant to charge their credit or debit card automatically at set intervals. This method is common for subscription services, memberships, and ongoing payments.&#x20;

| Feature                 | Direct Debit                  | Recurring Card Payments                              |
| ----------------------- | ----------------------------- | ---------------------------------------------------- |
| **Authorization**       | Requires signed mandate       | Needs card details and agreement                     |
| **Transaction fees**    | Lower                         | Higher, especially for card-not-present transactions |
| **Customer protection** | Direct Debit Guarantee        | Card network security measures                       |
| **Success rate**        | Higher (95%+)                 | Lower (failure rates can exceed 20%)                 |
| **Payment source**      | Bank account                  | Credit or debit card                                 |
| **Processing time**     | 3-5 working days              | Immediate to next-day                                |
| **Flexibility**         | Fixed dates, variable amounts | Flexible dates and amounts                           |

Pros and cons

### Direct Debit&#x20;

#### Pros:&#x20;

* Higher success rates&#x20;
* Lower transaction fees&#x20;
* Strong customer protection (Direct Debit Guarantee)&#x20;
* Ideal for variable payment amounts&#x20;

#### Cons:&#x20;

* Longer processing time&#x20;
* Requires bank account details&#x20;
* Less flexibility in payment dates&#x20;
* Recurring Card Payments&#x20;

### Recurring Card Payments

#### Pros:&#x20;

* Fast processing&#x20;
* Convenient for customers&#x20;
* Flexible payment dates&#x20;
* Suitable for international transactions&#x20;

#### Cons:&#x20;

* Higher failure rates due to card expiration/cancellation&#x20;
* Higher transaction fees&#x20;
* Less protection compared to Direct Debit Guarantee&#x20;

### When to use each payment method&#x20;

#### Direct Debit is best for:&#x20;

* Utility bills and regular services&#x20;
* Membership fees&#x20;
* B2B transactions&#x20;
* Businesses prioritizing payment reliability&#x20;

#### Recurring card payments are ideal for:&#x20;

* Subscription-based services&#x20;
* E-commerce businesses&#x20;
* International transactions&#x20;
* Businesses needing immediate payment processing&#x20;

### Costs and fees&#x20;

#### Direct Debit typically involves:&#x20;

* Setup fees: £100-£500&#x20;
* Transaction fees: 10p-50p per transaction&#x20;
* Monthly fees: £10-£50&#x20;

#### Recurring card payments usually incur:&#x20;

* Transaction fees: 1.5%-3.5% + 20p-30p per transaction&#x20;
* Monthly gateway fees: £20-£50&#x20;
* PCI compliance costs&#x20;

***

<mark style="color:purple;">RESOURCES</mark>

<https://docs.xft.finance/learn/flows/payments/debit-transfer>

<https://stripe.com/resources/more/ach-debit-an-in-depth-guide>

<https://www.utilitydive.com/news/us-utilities-have-billions-in-unpaid-customer-balances-what-should-they-do/607682/>

<https://www.fidelity.com/learning-center/smart-money/cant-pay-utility-bills>