What is a debit order and how does it work?

By Eddy Silveira, Founder and Managing Director at Debt-Savvy


Hi, my name is Eddy, Founder and Managing Director at Debt-Savvy, and today I am going to teach you about reversing debit orders. Here at Debt-Savvy we help people with their debts, and reversing debit orders is a small part of the process. This is what you need to know:

"A debit order is a way for a third party (that you have given pre-approved permission) to collect money from your bank account automatically on a certain date or when there are enough funds in the account. A debit order is typically used to collect monthly subscriptions, insurance premiums or loan repayments. Banks in South Africa process about 56 million debit orders a month."


Can you dispute/reverse a debit order?


Yes. Debit orders below R200 can usually be disputed using your banking app or online banking. To reverse a debit order, you need to take some action. For a debit order above R200, a trip to the branch is required or a call to your banks helpdesk needs to be made. When disputing debit orders, it is important to bear in mind that the account will show as unpaid, this will have a negative impact on your credit score and can prevent you from qualifying for credit in the future, for example a home loan or a vehicle loan. Debit orders that are unsuccessful due to the funds not been provided for will also have a negative effect on your credit score. This will also result in penalty fees from your bank, which can range from R5 to R115 depending on the type of bank account you have.


How long does it take for a debit order to be reversed?


Once a debit order has been disputed, the funds should reflect in your account immediately, regardless of the amount.


Types of Debit Orders


Authenticated Early Debit Orders (AEDO) are usually used by high-risk lenders as these debit orders cannot under any circumstances be disputed or reversed. AEDO is usually used by smaller lenders especially for payday loans. You will know the lender in question will be using this type of debit order as they will ask you to use your bank card and authenticate the transaction by entering your pin. Credit providers known to use these type of debit orders are Barko Financial Services and Finbond. The only way to avoid these types of debit orders will be to get your salary deposited into a new bank account.


Non-Authenticated Early Debit Order (NAEDO). The only requirement to create a NAEDO debit order is to obtain the payer’s bank account details. Payers are not required to be present when deductions are created. This unfortunately leaves consumers open to fraudulent debit orders. All one has to do is somehow obtain your account number and you will be at risk of having a debit order loaded against your account. Unlike AEDO debit orders, NAEDO debit orders can be disputed and your payments can be reversed.


Stopping a Debit Order


A customer can cancel a debit order in writing and may also ask the bank to place stop payment instructions on the account. The bank will advise for how long the stop payment will be effective and may charge a fee for this. Stop payment instructions will not cancel the debit order, it only prevents future debit orders going off for a limited and predefined period of time. It is always a good idea to examine your bank statement on a monthly basis, as debit orders less than R100 usually will not trigger a notification. Unfortunately, many debit orders such as these are created everyday, depriving South Africans of their hard earned cash.


How much does a debit order cost to stop?


Debit orders can range from as little as R10 to R 30,000 and will affect the cost of the debit order. Debit orders below R200 are free and above R200 will cost you. Here is a summary:

(Prices are from banks on 12/07/2018)

Capitec Bank: Stopping a debit order is free.

Nedbank: R40 for stop payments, this is valid for three months, if you reverse it you get your funds back, after 3 months the bank keeps the money.

ABSA: R30.26 – Within 40 days from date collection. After 40 days it is R146.27

Disputing a debit order are the following prices:

Nedbank: R5 on the phone. R5 using the app. R5 going into the branch.

Capitec: R40.35 on the phone. R20.35 using the app. R40.35 going into the branch.

Standard Bank: On the phone it is free. Can’t do it on the app. Going into the branch is free.

ABSA: R60.53 if you are going into the branch. Free if you do it online.

FNB: R5 for online banking. R17.50 for telephone banking. R50 at a branch.


How can Debt-Savvy help you today?


Debt-Savvy can assess your credit agreements over the phone and see if you qualify for a solution. Once we accept your application we will cancel your debit orders for you. We do this by contacting your banks on your behalf after you sign the Debt-Savvy Debit Order Cancellation Form. Contact Debt-Savvy today, and live a carefree life tomorrow.


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