See the difference when bills are paid invisibly

If your life is a mess of late and chunky bills then direct debit could be the answer, writes Steve Lodge. Paying by direct debit is convenient. You gain some peace of mind, knowing that bills will be paid automatically and on time, and nowadays the payment method can save you money, too.

A wide number of utility companies and other bill issuers are giving discounts for those who pay by direct debit, so passing on some of the savings they make by not having to process cheques and send reminders. A typical household could save pounds 50 a year by paying its regular bills by direct debit, claims Bacs, the bill payment organisation.

Our table shows some deals on offer. Many, from the utilities, involve a switch from paying at the end of a quarter to a monthly "pay-as-you- go" system. Such schemes in turn offer the benefit of spreading the cost of bills.

Through direct debit, bill issuers get paid automatically from your bank account. While standing orders are for fixed amounts, direct debit gives authority to the bill issuer to draw any amount from your account. Direct debit is most suitable for regular payments which alter. If, for instance, you pay your mortgage by standing order, every time the rate alters you need to fill in a new order. With direct debit the payment amount should change automatically.

Importantly, however, if payments are due to change you should get 14 days' notice, giving you time to challenge the new bill, ensure you have enough money to pay it and, if necessary, cancel payment altogether. If there is any dispute over dates or the amount of money, you are entitled to an immediate refund by your bank and building society while the dispute is resolved (meanwhile, the bill stays paid).

Two-thirds of people now pay at least one bill by direct debit and the number of direct debits has grown 12 per cent a year in the 1990s.

The number of organisations offering discounts has grown too, though discounts for paying insurance premiums by direct debit remain rare. To set up a direct debit you will normally need a current account with a bank or building society. Fill in the instruction form provided by the bill issuer and return it. There is no need to contact your bank; the issuer arranges the payments.

For a direct debit information pack, which includes details of many of the available discounts, call 0345 720000.

DIRECT DEBIT DEALS

BT. pounds 1 off your quarterly bill. Or you can pay monthly by direct debit, with payments based on estimated usage. In this case there is no discount.

British Gas. About 6 per cent under DirectPay, a monthly payment plan based on estimated annual usage (so ignoring seasonal peaks). In effect you pay as you use, rather than with traditional quarterly billing where you pay for gas used in the previous quarter

TV Licensing. No discount; in fact, under the quarterly scheme you pay pounds 5 a year more for a colour TV licence. Under TV Licensing's monthly personal payment plan you stagger the cost of the licence but in effect you pay half the cost before the licence comes into force.

London Electricity. Around 4 per cent, depending on usage. But to get the discount you switch to monthly payments based on estimated usage rather than paying a quarterly bill after you have used the electricity.

Thames Water. No discount for direct debit but you can choose to pay for your water in eight payments over the year (instead of twice yearly).