A direct debit is a financial transaction in which money is removed from your checking account or business account by an authorized third party. A direct debit may be performed just once, but the term typically denotes a recurring transaction.
As the bank account holder, you have to authorize a direct debit before the beneficiary can begin making withdrawals. In the case of a recurring direct debit, you only need to authorize the direct debit once. After that, money will be deducted from your account automatically at the specified intervals with no additional action required on your part.
That makes a direct debit an efficient form of making recurrent payments. Typical examples of recurring payments include phone bills, utility bills and home rental payments.
The disadvantage of a direct debit compared to other payment methods (like e-bills) is that once you authorize the direct debit, you won’t have a chance to review charges before they are made.
In Switzerland, another direct debit model known as LSV+ is available. This type of direct debit gives you better protection by allowing you to object to payments up to 30 days after the money is deducted from your account.
Both LSV and LSV+ are normally offered free-of-charge by Swiss checking accounts and online banking services. The Debit Direct service offered by Postfinance is a good example of a direct debit service.
A direct debit differs from a standing order in that money is withdrawn by an authorized third party rather than transferred by the account holder - as is the case with a standing order.
You can compare the costs of Swiss private accounts based on the number of direct debits and standing orders which you perform annually using the moneyland.ch private account comparison.