PayPal Direct Debit Instruction

Remay Villaester (May)

PayPal is one of many UK payment providers which offer direct debit to its customers. If you use PayPal to make online purchases, you’ll be able to use this feature to potentially save time at checkout.

But how does PayPal direct debit work, and how do you set it up? In this guide, we’ll cover all the basics about setting up a PayPal direct debit instruction, including any fees you need to know about.

We’ll also look at Wise Business, which you can use in addition to PayPal to save some money on international payments.

But first, let’s start with what a direct debit instruction actually is.

What is a direct debit instruction?

A direct debit instruction is where the payee (you) gives a payment provider like PayPal the authority to directly take money from your bank account for any purchases or payments you approve.

This means you can pay for anything quickly and easily, with no extra steps or middleman holding things up. You don’t need to transfer money from your bank to your PayPal balance, as the payment will be taken straight from your bank by PayPal. What’s more, the payments will appear directly on your bank statement.

You can use PayPal direct debits for personal purchases or if you run a business, to pay your suppliers and purchase goods.

One of the main benefits of PayPal direct debits is that it gives you more payment choices when purchasing online. You can choose whichever payment method works best for you at that very moment – which may be direct debit, or it could be another method such as a credit card.

How does PayPal direct debit work?

There are a few steps to follow to set up direct debits on your PayPal account, which we’ll cover in more detail in just a moment. But the process involves adding your bank details and accepting something known as a SEPA mandate.

A SEPA (Single Euro Payments Area) mandate is the authorisation for a payment provider to collect payments from your bank. You won’t need to accept the mandate every time you want to make a purchase. Once accepted, the mandate gives PayPal permission to take future payments too, but only ones that you make or are informed about.

There are strict rules and regulations which apply to SEPA mandates and direct debits, so you can have confidence that your money is protected.

With your bank details added and SEPA mandate accepted, all you need to do is shop as normal. If you choose ‘direct debit’ at the PayPal checkout, PayPal will automatically take the money from your bank account. Remember that you don’t have to use direct debit for every payment – it’s just an extra option to choose from.

How much does it cost?

The good news for PayPal users is that making payments using direct debit is free.

However, this only applies to payments that don’t involve a currency conversion. If you want to buy anything from overseas and pay in GBP using PayPal direct debit, you’ll be charged a currency conversion fee of 3%¹ above the base exchange rate. This will make your payment more expensive overall.

How to set up direct debit payments with PayPal

Ready to set up a PayPal direct debit instruction? Simply follow these steps:

  1. Login to your PayPal account and head to ‘Wallet’
  2. Add your bank account details
  3. You may also need to provide an IBAN (International Bank Account Number). You can usually find your IBAN in your online banking or on your bank statement – or contact your bank directly.
  4. You’ll also need to confirm your bank account, waiting for PayPal to deposit a tiny amount in your bank account along with a 4-digit verification code. This code will appear on your bank statement. Once you have it, head back to PayPal and ‘Wallet’, find your ‘Unconfirmed’ bank account and click ‘Confirm’ to enter the verification code.
  5. Accept the SEPA mandate giving PayPal permission to debit money directly from your bank account.
  6. You may also receive an email from PayPal asking you to confirm that the bank account belongs to you.

And that’s it – direct debits should be all set up and you can shop as normal, choosing PayPal when you checkout.

What’s good to have if you’re sending and receiving international payments?

PayPal direct debit is undoubtedly super handy for making payments within the UK.

However, when you sum up the fees when paying and receiving in foreign currencies, it can get quite expensive.

To reduce the international transfer cost, consider setting up a multi-currency account with Wise. It will allow you to receive international payments, make direct debit payments in different currencies and pay only a small fee to convert your money and you can make sure that you always get the real exchange rate. You can also order a debit card for faster payments locally and overseas.

After reading this guide, you should be all set to use PayPal direct debit. It should only take a few minutes to set up a PayPal direct debit instruction, and the beauty of it is that you only have to do it once. Then you can start enjoying a greater choice of ways to pay when you shop online.

But remember that when it comes to international payments, you could save money with a PayPal alternative such as Wise. Whether you’re a shopper or a business, make sure you always check and compare the fees so that you’re never met with any nasty unexpected costs.

Sources used:

  1. PayPal Consumer fees
  2. PayPal Merchant Fees

Sources checked on 12-March 2021.

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from Wise Payments Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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