If you don’t know what the difference is between a stop order and a debit order, you’re not alone. But knowing your way around these two payment options can make a big difference to your finances.
This is particularly true in South Africa, where debit order abuse is widespread. We’ve all heard stories about unethical companies or individuals taking advantage of people, getting them to agree to future payments under false or misleading pretences. Many only realise they’ve been misled when payments are made from their account for services they don’t want or didn’t know they’d signed up for.
So, what is the difference between a debit order and a stop order?
What is a stop order?
A stop order is an agreement between you and your bank. You instruct the bank to make a series of future-dated repeat payments on your behalf. You can instruct the bank to cancel the stop order at any time.
What is a debit order?
A debit order is an agreement between you and a third party. The debit order authorises the third party to take funds from your account. For example, if you take out a loan, you will be required to agree to a debit order for the repayments. Your bank cannot cancel a debit order because the agreement is not with the bank but with another company or individual.
Debit orders are an easy and convenient way to keep up with your loan repayments or payments to other legitimate third parties.
Tips to help you honour debit orders
Honouring your debit orders is important. Not only does it save you from penalty fees, but it also helps keep your credit score healthy. Plan for your debit orders properly by creating a monthly budget, using our free budget template. Here are a few other tips to help you honour your debit orders
● Ensure that sufficient money is available in your account each month.
● Don’t withdraw all your money from your account to avoid a debit order.
● If you can no longer meet your debit order payments, make new arrangements with the respective parties.
To protect consumers and legitimate product and service providers, the banks are introducing a new system called DebiCheck debit order. This requires you to confirm with your bank any debit orders you undertake with a third party.
Although it will add another step to transactions, DebiCheck will help to protect you from illegitimate businesses or scammers who try to defund your account.