Direct Payment for Individuals : How Direct Payment Works

Introduction | Benefits | How It Works | Fast Facts | FAQ

1. Authorize

Authorize a billing company in writing or online to debit regularly scheduled payments from your checking or savings account, and provide your account information. Authorization forms vary slightly with each company that sends you bills, but the process is the same.

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2. Test

The company may perform a test run by sending the checking or savings account information you provided, but no dollar amount, to your financial institution. This entry is called a pre-notification, and is done to make certain that your account numbers have been recorded correctly.

3. Notice

If the amount of the monthly payment varies, you will be notified of the payment amount at least 10 days prior to the payment date. If the date of the debit varies from the agreed upon date or a date is not specified in the authorization, a notice must be sent to you at least 7 days prior to the debit date. This way, you always know how much and when your account will be debited.

4. Process

Your billing company processes the payment electronically - in banking terms, this is known as an ACH transaction.

5. Post

Your bank debits your account, and credits the account of your billing company.

6. Confirm

Your monthly account statement from your financial institution will include detailed reports of your Direct Payment transactions.

The volume of electronic payments processed through the ACH network has more than doubled in the last five years as consumers and businesses become familiar with the convenience and cost savings associated with using electronic payments.

"With Direct Payment, you know in advance which days each month your accounts will be debited. With payments mailed by check, there's some uncertainty. Your monthly bank statement will note the date and amount of each automated transaction.

In the case of varying payments like a monthly utility bill, you can expect to receive a statement 10 days before the transaction date, providing time to question a charge. ... Federal law prohibits unauthorized debits, including premature ones. Besides, automatic processing eliminates the risk of payments or deposits getting stolen in the mail."

- Russ Wiles,
The Arizona Republic