Payment methods in the UK

Digital money transfers and online payment methods have become more and more popular over the past couple of decades. Replacing cash and cheque payments, cashless money transfers offer a convenient way to send funds for many employers and service providers.

However, are paperless payment options always best for consumers? Our guide explores the different payment options you can use in the UK.

In this guide: 

• What payment methods are available in the UK?
• What can I use online payment methods for?
• Modern digital payment options
• Which payment method is safest?

What payment methods are available in the UK?

While there are various ways to pay in the UK, the most common payment methods include:

• Standing orders
• Direct Debits
• Continuous Payment Authority (CPAs)
• Cards (debit and credit)
• Digital wallets
• Buy Now, Pay Later (BNPL)

What are standing order payments?

A standing order is an instruction from the payer, service, or product recipient for their nominated bank to pay a third party at set intervals. Standing orders are often used to pay rent, phone contracts, and utilities. They can be arranged to be recurring or set up to occur repeatedly over several payment periods.

In the last decade, the UK has also used a new system which allows these transfers to arrive the same day instead of within the previously accepted three-day standard practice. In some countries including South Korea, these types of bank payments incur a fee. However, in the UK, this is rarely the case.

What is a Direct Debit?

Rather than an instruction to the bank like standing orders, a Direct Debit requests a money transfer from the service provider. This includes debit or sometimes even credit card providers such as Visa, MasterCard, American Express, and others.

When it comes to forms of payment, this has been a popular option over the past 50 years. Direct Debit payments account for over £4 billion each year, with nine out of ten people living in the UK using Direct Debits for various services and subscriptions.

As opposed to standing orders, the company taking the payments determines the value and frequency of each transaction. This is common in areas such as utilities, where the consumption of the product or service can vary from month to month.

It’s important to remain diligent and always make sure you have enough money in your bank to pay out. Failing to factor Direct Debits into your budget could cause you to go into the overdraft of your account, face penalty fees, and even harm your credit rating in the long term.

For help with budgeting and saving, head over to our guide on saving on your monthly expenses.

What is a Continuous Payment Authority (CPA)?

A CPA, or Continuous Payment Authority, is another type of recurring payment method where the consumer gives a company permission to take money from their debit or credit account. They’re often used to pay for monthly services and subscriptions, such as streaming services like Spotify or Netflix.

A CPA goes one step further than a Direct Debit. Where a Direct Debit gives a company authorisation to take payments at regular intervals, a CPA gives further permissions to the payee. These permissions include being able to take payments once they are owed without necessarily being taken on a ‘set’ date.

What can I use online payment methods for?

You can use online payment methods to pay for a range of financial and everyday products, including:

• Personal loans
• Rent to your landlord or the council
• Utility payments
• Credit cards
• Your gas and electricity provider (Direct Debit)
• Monthly subscription services

If you’re repaying a direct lender loan, or a loan taken out via brokers or comparison sites, lenders will often set up a CPA to help make it easier to repay on time..

It’s important to discern between the different payment methods in the UK so you can budget and predict your future finances.

For example, many people think that they have standing orders, when in fact they have Direct Debits or even continuous payment authorities. So, you’ll need to get to grips with the different ways to pay and understand how each one works. That way, you’ll know how to manage them better.

Modern digital payment options

In addition to traditional payment options like standing orders and Direct Debits, there are now various other cashless payment methods, offering fast, secure, and flexible ways of managing spending. These include:

Digital wallets

Digital wallets store your payment details securely on your smartphone, allowing you to pay in-store, online, or in apps without the need to carry a physical card.

Popular services include those like Apple Pay, Google Pay, and Samsung Pay, which are often protected by Face ID or passwords to add another layer of security.

Buy Now, Pay Later (BNPL)

Buy Now Pay Later (BNPL) allows consumers to spread the cost of purchases over several weeks or months, and it’s widely available at online checkouts.

While this can help with short-term affordability, it’s crucial to keep on top of payments. This is because missed payments can result in late fees, and it could negatively impact your credit score.

Learn more with our guide to using Buy Now Pay Later.

Which payment method is safest?

Standing orders can be set to run for a certain amount of time, making this the easiest method to manage and control. Direct Debits are also set by you from your bank account, making them one of the safest ways to pay for and monitor your expenses.

Explore more helpful resources

Hopefully you’re now aware of the different types of payment methods available in the UK. Whether it’s the convenience of Direct Debit payments and standing orders, or the ease of digital wallets, there are plenty of ways to pay safely and securely nowadays.

Looking for more insights? You’ll find plenty over on the Moneyboat blog. There you can dive into money saving tips and hacks or learn more about responsible borrowing.

And if you’re struggling to keep on top of payments, there are various third-party organisations and charities which offer free, independent support. No matter your situation, there’s always help available.