Standing Order: Description, Advantages and Disadvantages

Understanding standing order

Standing order is a term in finance sector which means an instruction to a bank by an account holder to make regular fixed payments to a particular person or organization. Standing order is automatic and it helps account holders and save them the stress of coming to the bank regularly to make some payments. With the help of standing orders, many busy account holders in banks have their time to do other businesses instead of frequenting the bank.



With the help of standing orders, many are able to pay their bills with less stress. Example is the payment of utility bills by electric current users. When they pay fixed amount every month, they worry less once they initiate standing orders with their banks.

Standing Orders are a way of setting up a regular, fixed payment from your bank account. You can set a payment to be taken at a certain frequency (for example, the 1st of each month; or every quarter etc). The source of the information is Malta Financial Services Authority. According to the organization, the amount of the money debited from the account holder's bank account is always fixed. The organization went ahead and stated that this kind of service can be used to pay insurance premiums.

How to Initiate Standing Order

The first step for the initiation of standing order is to visit the bank you hold account in. When you get to the bank, the officer in charge of this kind of transaction asks you some questions. You answered him correctly. One of the questions he is likely to ask you is the reason you want to initiate or start up standing order from your account with the bank.

The bank staff gives you a form to fill for the standing order. The things contain in the form is usually your full name, address, location, date of birth, your account number, purpose for initiating the standing order, the name of the organization you are carrying out the transaction to, the companies account number, the debit date, your signature and the date you signed up for the standing order. These are the basic information needed.

After filling the form with the basic information, the transaction is ready to be kick started. The officer of the bank in charge enters these basic information in the system. After, the soft copy of the form filled by the customer is scanned to the head office for verification. If all the information provided by the account holder is correct, the standing order starts on the chosen debit date by the customer.

Note: The standing order may fail if the customer did not fill the necessary information correctly. Example, if the signature signed by the customer on the standing order form is not the same with the one the bank has in its system, the standing order will fail. Also, it can fail at any particular interval if the account holder has insufficient fund on the debit date.

What are the disadvantages of Standing Order?

Standing order has many disadvantages. The disadvantages of standing order are as follow:

• Standing order can make account holders feel bad when the money they want to withdraw for a particular purpose is debited. 
• It can make account holders borrow money from other people. Because the account holder may not have enough money left in his or her account because of standing order, he may end up asking for loan and pay interest on the loan. 
• Standing order can disorganize an account holder at a crucial moment. Imagine someone went to market to buy some items to be used in the home, and after the picking of the items and few minutes to make payment for the items got debit alert for the standing order he placed on his account. Lets take for example that the total cost of the item was $100, and he picked items that cost $80 and he got debited $70 from his account due to the standing order. How do you think he can make the payment of the items he gathered as he wanted to make transfer to the seller from his bank account as he was debited for standing order? This kind of experience can disorganize someone. It has happened to some people before. 
• No payment notifications. Sometimes money is debited from the account of the holder and no payment notification given to him on the standing order debit. This is usually caused by bad network. 
• Standing order can fail in some cases. When this happens, it can be due to low account balance or technical issue. This can make customers miss some payments if the payments are to be made at a particular time of the month. 

Symbol of bank where standing order is set up; source: PNG Guru

What are the Advantages of Standing Order

Standing order has many advantages. The advantages of standing order are as follow:

• Early payment: Standing order can make customers to make payments for some goods or services on time. It can make some transactions to go smoothly with less stress. 
• Stand order help policyholders in insurance to pay their premiums as of when due. With the help of standing order, many policyholders are debited at the debit date and it makes them avoid missing any premium payment and in return makes it easy for them to make claim and get the benefit in any policy they signed up for. 
• In insurance, standing order make insurance agents to earn good commission. Unlike cash payments, signing up for standing order can make customers pay their premiums automatically and this in return make agents earn their commissions from those premiums without much stress. 
• Standing order make business owners to use their time for more productive activities. With the help of standing order, businessmen and women do not need to visit the bank for some transactions. Standing order has make such transactions easy. 

Customer filling standing order form being guided by bank staff

Can the Amount of Money debited in Standing Order be changed?

The answer to that question is yes. The amount of money initially put in standing other can be increase and in the same way can be reduced. It is a flexible operation.

If a customer wants to make any change on the amount initially debited, he has to visited the bank. When he gets there, he fills another standing other form and write a letter. For this to take effect, the old standing order initially effected has to be canceled.

Also, the date of debit can be changed as well. Maybe the person that initiated the standing order is a civil servant and there is shift in the salary payment date, he can still write for change of date of debit. It is possible and practical.

Canceling your Standing Order

Standing order setup is not a suicide mission. For the question most people usually ask on whether standing order can be canceled, the answer is yes. Standing order can be canceled and stopped.

What you have to do is to visit your bank branch and you will be told what to do. For someone that once asked whether he can cancel his standing order through Zenith Bank Application, the best thing is to visit the bank branch. Once you cancel the standing order by writing and signing well, you will not be debited again.

Also, you can decide to call the customer care line of the bank in question. Most of them work 24 hours in a day. So call them and you will get a good answer in return.

Reference

MFSA (2020), Standing Orders, published by Malta Financial Services Authority, Birkirkara, Malta