If you’re looking to switch bank accounts to get your hands on some free money, then the chances are you’ll need some Direct Debits. Let’s take a look at some of the best options available that won’t end up costing you an arm and a leg.
The best small and cheap Direct Debits to set up
- Plum
- Moneybox
- Sprive
- PayPal
- Credit card
- Charities
- National Lottery
- Investment accounts
- Ecology Building Society
I have made quite a decent extra income over the last ten years from switching banks and earning cashback from various current accounts such as Lloyds, Barclays and NatWest. It takes just a few minutes of my time and gives a real income boost.
But there’s one potential stumbling block. Most of these offers require you to have at least two ‘active Direct Debits’. The reason behind this is to prove that the account you’re using is one that you use quite often (even if it’s not).
That’s all well and good but most Direct Debits cost you money – they’re in exchange for certain services. But it is possible to set some up that won’t cost you anything. At least, the money that goes out from one of your accounts goes back into another of your accounts.
What is a Direct Debit?
It’s simply an instruction from you to your bank allowing a company to take money from your account. The date and how much the company can take from your account can go up and down, as long as you receive notice beforehand.
If there’s an error, you can claim the money back immediately and cancel the instruction at any time.
What is an active Direct Debit?
As mentioned above, most banks want you to have an active (or two) Direct Debit. This is simply an active instruction taken from your account within the last 13 months.
What are the most common Direct Debits you can use?
If you’re happy to spread your Direct Debits across several accounts, you could use one of your current instructions. Some of the most common include:
- Energy bills
- Mobile phones
- Broadband
- TV package (including streaming services like Netflix)
- TV licence
- Gym membership
- Council tax
But you may not always want to do that. It’s often far easier to have all of your outgoings in one place so you can keep track. Also, I have a Santander Edge account, which pays me cashback for many of my Direct Debits, so I’m not keen on them being attached to other accounts.
If you think you need to set up some new Direct Debits, here are some others to consider.
What are some easy Direct Debits to set up?
If you want to set up a Direct Debit quickly and cheaply, Plum and Sprive are the best options. They’re free to use and should usually be up and running within 1-2 weeks. Moneybox works in a similar way, although an account costs £1 per month.
Although PayPal is free, it doesn’t seem to work for most people.
Plum
Plum – this app uses AI to take money from your bank account weekly. Although you can’t specify exactly how much money is taken, you can edit the AI to say whether it’s a large or small Direct Debit.
You can then place this money into a savings account, invest it or send it back to your bank. So it won’t cost you a penny. Plum also offers a paid subscription service, but this isn’t necessary for your Direct Debit.
Sprive
Sprive – the Sprive app was created to help homeowners pay off their mortgages faster. It uses AI to calculate how much you can save each month and then uses a Direct Debit to transfer it from your current account to Sprive. You can then use this money towards your mortgage or transfer it back to your bank at the end of the month if you’re struggling. The service is completely free to use.
Use the code INRWFKGS when you join and you’ll get a £5 bonus towards your mortgage.
Moneybox
Moneybox – this account works similarly to Plum. Each week, Moneybox will take a Direct Debit from your account. But instead of using AI, this will be based on a set amount you decide or other features like round ups.
Not only can you save or invest your money, Moneybox goes one step further and provides a Lifetime ISA. But you don’t have to put your money away and it can be sent straight back to your bank. It’s important to note that Moneybox does have a monthly fee of £1.
The first DD should be taken within a week or so.
PayPal
PayPal Direct Debit – when you pay for something through PayPal, then PayPal will take the money from your current account as a Direct Debit. That is unless you have money in your PayPal balance. Even if you do, check the box for PayPal to take it from your bank instead.
You can also send a Direct Debit to PayPal without making a purchase. As long as you have a bank account listed, select the wallet option and choose Add Money in the app or Transfer Money on the PayPal website. Your funds should be transferred by Direct Debit within a few days.
*Please note that some people have contacted me to say that this doesn’t work for them and money deposited into their account is by transfer only and not by Direct Debit. Unfortunately, PayPal chat isn’t clear on why this happens.
Other Direct Debits
The rest of the Direct Debits on this list take a little longer before they become active. In most cases, it will be 4-6 weeks.
HMRC Self Assesment – for those who have the pleasure of completing a Self Assesment each year, you’ll be pleased to know that you can set up a DD to make payments. And, these can be for very small amounts.
Your credit card – if you have a credit card, it’s usually best practice to set up a Direct Debit so you don’t forget to make your monthly payment.
Charities – plenty of charities will be more than happy to receive a Direct Debit from you each month. For most, the minimum you can donate is £2. Red Cross and Macmillan are both great options.
National lottery – if you’re partial to purchasing a lottery ticket at least once a month, then why not move it online and set up a Direct Debit to pay?
Investments – Fidelity, Vanguard and Nutmeg – these aren’t what I would consider cheap Direct Debits as they generally need you to transfer at least £50 per month. However, they can go into an investment account and be transferred back to your bank when you like.
Savings accounts – there used to be a load of accounts that you could set up Direct Debits for, including the Post Office and Tesco. Now, they’re few and far between. The Ecology Building Society still offers the option, although it’s a minimum of £25 per month.
Can you set up a 1p Direct Debit?
Although you could set up Direct Debits for one pence in the past, it’s no longer possible. This is probably due to the costs to the company involved.
What about those Direct Debit companies?
I’ve noticed there are a lot of companies forming, who will take a Direct Debit from you each month. They have been created solely for this purpose and nothing else. I would recommend you stick with a company that give you something back in return.
What is the cheapest Direct Debit you can set up?
If you use the Plum or Sprive apps, these are free to set up and use. The money will go from your current account straight to one of your apps. You can then transfer the money back to your bank for no cost.
Further reading
Why not take a look at my post for the best bank switching offers?
Jb
Monday 16th of September 2024
Would gambling apps like Paddy Power, Bet365 etc count as direct debits?
Pete Chatfield
Monday 16th of September 2024
Hi JB. I don't believe any of the major bookies offer a direct debit option. Payment is usually only by card or bank transfer.