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What is a Standing Order?

Mary McMahon
Updated May 16, 2024
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A standing order is an order from a bank customer directing the bank to pay a specific amount at set intervals into another bank account. These payments are made directly from bank to bank and do not require human intervention, as bank computers can usually be set to process the payment. The standing order is good until it expires, or until the bank customer cancels it.

People may opt to use a standing order to make regular fixed payments on things like mortgages, car loans, and personal loans. Some banks actually offer an incentive for using standing orders, such as reducing the interest rate by a quarter of a percent if the customer sets up an automatic recurring payment. Using this system generates less paperwork than having a regular bill and payment plan and can also reduce the risks that the bank customer will default on the loan, making it easier for the bank and the client.

Standing orders can also be used for things like setting aside a set amount of money in savings every month, paying rent, or making personal payments on a private loan made between friends, employers and employees, or other individuals. People are not required to discuss the reasons behind the order when they place it, although banks may report standing orders if they appear to be evidence of illegal activity, as might be the case if a private individual was transferring large sums of money to another individual and the bank suspected drugs were involved.

When establishing a standing order, people can set up some restrictions. The order may fail if the bank account is overdrawn or if withdrawing the funds would violate the account's overdraft limit. Some customers use overdraft protection, asking the bank to automatically transfer funds from savings or another account to cover them if they overdraw, and this can be set to trigger with a standing order if there is a problem. Likewise, people can set up the order to end on a given date, such as when the term of a loan ends.

Standing orders are not good for covering fluctuating bills like utilities, because the bill will change every month. It is possible to set up automatic bill payment, where the amount of the bill will be deducted every month on a set date or as soon as the bill is generated and submitted. People using standing orders or automatic bill pay are advised to check their statements each month for irregularities so they can be identified and addressed as quickly as possible.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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