Debit orders and stop orders are not only confusing but they also often end up making you feel completely helpless, as money seems to be deducted from your account without your having any control over it.
A couple of years ago I heard of someone who was paying a short-term insurance premium by debit order and who suddenly found that the amount being deducted from her account had been doubled, without her knowledge. If this has happened to you, you will know the amount of time consumed in hectoring your bank and the payee to get payments reversed.
According to the banks, there are two types of automatic payment from your account debit orders and stop orders and customers are often unaware of the difference.
A debit order is one where you authorise an outside company, such as an insurance company, to take money from your account. They inform the bank that they have this right and the bank acts on their authority.
First National Bank says if you have authorised a regular increase it will happen automatically on the company's notification to your bank. If the outside company you are paying via debit order starts deducting more money from your account than it is supposed to, you should discuss this with the company and then ask your bank to show you the authorisation for the higher amount. If they cannot produce that authorisation, the bank should reverse the transaction.
To stop a debit order you must notify the company you are paying in writing and they will notify the bank. You can also tell the bank directly and inform the company you have done so. If the payment still goes through, the bank will reverse it within "a reasonable time", which is about 20 days.
The cost of a debit order is the normal service fee. This fee depends on the transaction value, usually rising for higher amounts.
A stop order is an instruction you give to the bank to deduct money from your account and pass it to a third person, for example rent to a landlord. This is the same amount every month and no one but you can authorise an increase.
To cease a stop order you notify the bank in writing, or else it comes to an end automatically in the example of hire purchase, when you have completed your payments.
The cost of a stop order is the normal service fee plus a charge of about R2 to cover the bank's costs for setting up a stop order.
Stop orders and debit orders are for those who are too absent-minded to remember to make regular payments. If you are quite organised you might be better off paying regular amounts on your own initiative. You don't have to visit the retailer or post office and queue because there are various options for making electronic payments which enable you to control the amount of money and the length of time that you are paying.
However, some commercial companies insist on a debit order, and you should also consider the risks of failing to make a payment, for example an insurance premium which could result in your losing cover when you need it.
Other electronic payment options which are open to you are to link your accounts to your ATM card and pay them at an ATM, through Beltel or over the Internet, depending on the services your bank offers.