SEPA Direct Debit Explained

Key takeaways

• SEPA Direct Debit allows businesses to collect payments in euros directly from the customers’ accounts.
• SEPA’s full form is “Single Euro Payments Area.”
• The retailer receives the money within one day via the SEPA direct debit procedure.

This is how you do it

• Fill out and sign the SEPA direct debit authorization (SEPA Lastschriftmandat) to authorize the merchant to debit your account.
• You can revoke the SEPA direct debit authorization at any time by informing the merchant in writing. You can use our sample letter to do so.
• If a valid SEPA Lastschriftmandat exists, you can claim the debited money back from your bank within 8 weeks. Otherwise, you have 13 months to claim the money back.

Table of Contents

What is SEPA?

The full form of SEPA is “Single Euro Payments Area.” It’s a European Union (EU) initiative to harmonize payments across the Eurozone. 

The goals of SEPA are

• Make payments across the Eurozone easy and cheap.
• Create a single market.

The European Payments Council (EPC) created three SEPA payment schemes to achieve these goals. 

• SEPA Direct Debit (SDD)
• SEPA Credit Transfer (SCT)
• SEPA Cards Framework (SCF)

In this guide, we will focus on SEPA Direct Debit.

What is the SEPA direct debit procedure?

The SEPA Direct Debit is a “direct debit system.” It allows businesses to collect payments in euros directly from the customers’ accounts.

How does the “Direct Debit” work?

In the Direct Debit system, you authorize the merchant to debit the money from your account. This system is also called a Pull-Based system.

In this, the merchant initiates the payment instead of the customer.

You use the direct debit system in your daily life when shopping online or authorizing your electricity provider to debit monthly payments automatically.

What is SEPA Lastschriftmandat?

“SEPA Lastschriftmandat” is the document via which you authorize the merchant to debit your account directly.

You can use SEPA Lastschriftmandat to authorize the merchant to debit your account once or regularly. 

What information do you provide in SEPA Lastschriftmandat?

You provide the following information to the merchant to authorize “SEPA Direct Debit.”

• Payee’s/Merchant’s details
• Creditor identification number (Gläubiger-Identifikationsnummer)
• Payer’s/Your account details (Bank name and IBAN)
• Payer’s/Your name

You must sign the SEPA Lastschriftmandat. Electronically issued SEPA Lastschriftmandats are valid without signatures. 

This is how a typical SEPA Lastschriftmandat looks like.

How long does a SEPA direct debit take?

Once the retailer/merchant has the SEPA direct debit authorization, they can debit your account for the pending payment. Usually, the retailer will receive the money within one day.

Key features of SEPA Direct Debit

• SEPA Direct Debit is a pull-based system. This means the merchant is responsible for debiting your account for the pending payment.  
• SEPA Direct Debit payments are bank-to-bank. The banks interact with each other directly to process the payment. No card networks are involved in the “SEPA Direct Debit” process.
• Cost-effective: Customers don’t pay any SEPA direct debit fee. Merchants pay a very low fee, between 0.10€ and 1€ per transaction. 

In which countries do SEPA direct debit work?

SEPA direct debit works in the following countries.

• EU: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden
• EEA: Iceland, Norway, Liechtenstein
• Other: Switzerland, Monaco, San Marino, Great Britain

Can you revoke a SEPA direct debit mandate

Yes, you can revoke a SEPA direct debit mandate at any time. You must inform the merchant in writing about the revocation. 

You can use our sample letter to do so.

Remember, after revoking the SEPA direct debit, the merchant cannot debit your account directly. So, if you continue the contractual relationship, you must pay the merchant yourself.

What can you do if the merchant continues to debit your account after revocation?

If the merchant continues to debit via the SEPA mandate after a proper revocation, you can claim the money back through your bank. You have 13 months to do so.

How secure is the SEPA procedure?

SEPA direct debit is very secure. This is because of the following reasons.

• You can cancel a direct debit anytime.
• You can request the debited money back through your bank. You can do so directly via online banking.
  • If there is a valid SEPA direct debit mandate and an error occurs during the debit, you have eight weeks to complain. The period begins when the debit is made.
  • If there is no valid SEPA direct debit mandate or you have withdrawn it, the period to claim the money back is extended to 13 months. The merchant must prove that a valid mandate existed at the time of the direct debit.

Which banks in Germany offer SEPA direct debit?

All the banks in Germany offer SEPA direct debit procedures.

We find C24* to be the best free bank account in Germany. However, it offers services only in German. You can read our complete C24 review here.

Other free bank accounts worth considering are N26* and Revolut.

NOTE: We find that everyone should have accounts with at least two different banks in Germany. It’s because if one of your bank accounts is blocked, you can continue using the other account.

It’s also beneficial to have one account with a bank that has physical branches.