Avoid Paying By Direct Debit
March 20th, 2006 | POSTED BY ROB
In my Money Saving March post, Don’t Pay By Direct Debit from earlier today, I mentioned the cost associated with paying for your car and home insurance with Direct Debits. The insurance companies justify this cost by seeing it as a loan to the customer for paying the insurance back in instalments.
The Motley Fool has also picked up on this story:
MoneyExpert found rates as high as 37% APR for motor policies, and 35% APR for home contents cover. Given that the Bank of England’s base rate is just 4½% a year at present, spreading the cost of your policy over a year is usually an expensive mistake. Hence, by paying your insurance premium in instalments, you are, in effect, taking out a very expensive personal loan.
Their advice is to contribute monthly to a high-interest savings account, or to use a credit card that offers 0% on new purchases.
1 Comment on “Avoid Paying By Direct Debit”
Paying By Direct Debit / Personal finance and money information, tips and links / Money Watch, April 13th, 2006 at 3:38 pm
[...] In a post in March, I gave the reasons why it is not always the best idea to pay by Direct Debit. [...]
