Across the Board

Blog on e-business and online payments.

Credit Card vs Direct Debit Payments

One of the most popular payment methods in some countries (such as German-speaking regions) is direct debit. Let’s compare this payment method to credit card payments…

Few words at the beginning…

It’s really hard to define how exactly direct debits work. This payment method exists everywhere, practically in every country around the world. However… it works differently in almost each one of them. In some, it works in a manual way (such as in Poland, where you need to fill out a paper form and send it to your bank), in other it works automatically – similar to credit card payments (e.g. in Germany, Austria or the Netherlands). In case of online payments, direct debits are hugely popular in some countries (where it works automatically), while they’re almost never used at all in some other regions (where it works manually). Here we would like to focus on the more popular ones.

Direct debit – how the payment process looks like?

Buyer vists merchant’s website. He puts products to the shopping cart. Once he clicks on the ‘Checkout’ button, he has to put bank account details (bank account number, bank code, account holder) on the merchant’s website or is redirected to the payment provider’s website (where he needs to put bank account details).

Credit card payment – how the payment process looks like?

Buyer vists merchant’s website. He puts products to the shopping cart. Once he clicks on the ‘Checkout’ button, he has to put credit card details (credit card number, name on card, expiration date, CVV/CVC) on the merchant’s website or is redirected to the payment provider’s website (where he needs to put credit card details).

Descriptors

You can set your own dedicated descriptor for credit card payments, as well as for direct debits. How it exactly works depends on the payment provider. For instance, PayLane is able to give you the possibility to set your own dedicated descriptor for both of these payment methods.

Chargebacks

Credit cards – yes.
Direct debits – yes (depends on the bank).

Refunds

Credit cards – yes.
Direct debits – yes.

Multicurrency payments

You can have it in both payment methods.

API / invisible payment provider

Credit cards – yes.
Direct debits – yes.

Storing payment details

Credit cards – yes.
Direct debits – yes.

Recurring payments

Credit cards – yes.
Direct debits – yes.

Single click payments / single click payments

Credit cards – yes.
Direct debits – yes.

MOTO payments

Credit cards – yes.
Direct debits – yes (it’s not really a MOTO payment, but it’s similar…).

Time after which the merchant is sure that the buyer has paid

Credit cards – depends on credit card (in most cases – immediately).
Direct debits – depends on the bank and the country (in some cases – immediately, in other – after a few hours or even a few days).

Mobile payments

Credit cards – yes.
Direct debits – yes.

Why do people use these payment methods?

Credit cards – in most cases using credit cards for payment is easy and fast; it automates future payments of the same buyer; for lots of people this payment method is much safer (thanks to chargebacks).

Direct debits – buyer doesn’t need to use their own credit card (maybe he’s afraid of using credit card on the Internet?); could be easy and fast (in some countries); it could automate future payments of the same buyer

Why do merchants offer these payment methods?

Credit cards – because of the popularity and possibilities.
Direct debits – because of the popularity in some regions of the world (in case of automatic direct debits – because of the possibilities).

At the end…

You need to know that direct debit works differently in almost every country; sometimes it even works differently in between banks. And almost always it’s called differently in every country (ELV in Germany, ACH in the United States, BECS in Australia, etc).

PayLane's CEO with all kind of skills - programming, marketing, team leading and more. A movie lover and snowboard fan. @KarolZielinski

Are you a business looking for a payment processor?



Comments:

  • Pingback: My other publications you may have missed. October, November, 2012.()

  • Direct Debit Payments

    I really appreciate for your great work to post this article. Direct debit is an amazing payment service to manage all aspect of direct debit process as well as it helps to control over your cash.
    AccessPay

  • Unicornx

    Well, it is good that you wrote this summarization what I do not understand still is how can DD be cheaper than paying with credit card in Germany?

    The number1 reason why i got a separate visa gold card fro my bank was because I couldnt use my normal “debit” card online. It was only good for withdrawing money from atms nothing else (you cannot pay with it for a hotel stay for example).

    However paypal allowed me to add this debit card alltogether with my bank account at the beginning but when I tried to pay for anything it wanted me to top up my pp balance with bank transfer (which is pricey and the reason why I got the visa).

    Now that I have the Visa and added it to paypal it suddenly says that “Using direct debit is cheaper, paypal will try DD first then my visa then direct bank transfer”. Now just what the hekk….

Don't miss any articles!

Leave your email and get regular updates!

Close window