While using internet banking you must have seen the option of Standing instruction. Although this option is often avoided by us, it is a very useful tool. A standing order/instruction is an instruction from a customer instructing the bank to pay a specific amount at specified intervals to another bank account. Such a payment is made directly from bank to bank and does not require manual intervention, as the bank’s server can usually set up to process the payment. A standing order remains in force until it expires, or until the bank customer cancels it.
Benefits of using standing instruction:
- People can choose to use a standing order to make regular fixed payments on things like mortgages, car loans and personal loans. In this way, you will never miss any payment deadline.
- Some banks actually offer an incentive to use standing orders, such as reducing the interest rate by a quarter if the customer sets up automatic recurring payments.
- Using this system generates less paperwork than a regular bill and payment plan and can also reduce the risks that banks will default on customer loans, making it easier for the bank and the customer.
- Standing orders can also be used for paying regular expenses each month like paying rent, personal loans, paying tuition fee, sending money to home etc.
Also read: What Are Payments Banks, How Are They Different From Regular Banks? Why You Should Open Account In Them?
- Besides payments, you can also set standing instructions for your time deposits( FD, RD) and give bank instructions in advance. You can tell bank if you want to extend the tenure of your time deposit or you only want interest in your savings account and extend the tenure of principal amount or you can simply instruct to transfer whole amount into your current or savings account.
Things to keep in mind before setting an instruction:
There is no need to disclose the reasons behind the order while placing it, although banks can report standing orders if they appear to be evidence of illegal activity, as may be the case if a person was transferring large sums of money to another person and the bank gets suspicious about it.
A standing order can be set with several restrictions like people may impose restriction on using the overdraft limit of the bank account. Similarly, people can set an order to expire on a given date, such as when the loan expires.
Standing orders are not good for covering varying nature bills such as electricity, post-paid mobile bills etc. as these bill will change every month. However, it is possible to set up automatic bill payment, where the bill amount will be deducted every month on a specified date or as soon as the bill is generated and submitted. If you are using standing instruction or automatic bill payments then you must keep a check on your statements for discrepancies so that they can be identified and addressed as soon as possible.
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