Why they don’t want you in control…
I’ve been told that about 45% of all banking transactions in this country are made by Direct Debit. That figure doesn’t surprise me, but I can’t vouch for its accuracy. What I can say is that I can’t stand the damned things. On the other hand, companies love them. The reason for this dichotomy is one and the same – control. I like deciding what I am going to pay, when and how. For me a Standing Order is great, I instruct the bank to pay someone a specific amount on a specific date and I decide if and when I cancel or vary it. This is bad news for a business whose primary objective is to put processes in place that will generate maximum income from minimum administration. A Direct Debit is the perfect solution for them. The customer signs an instruction allowing the company to take an amount from the customers bank account and it hands control straight to the company. Add some terms and conditions that allow the company to vary the amount, have a company policy that doesn’t allow Standing Orders, perhaps include a penalty for any other methods of payment other than Direct Debits – but make sure its called an admin charge rather than a penalty, and there you have it. A system that boasts that it is the “favourite way” of paying for things, whilst brushing over the fact that no other system is allowed to grow into a practical alternative.
Look at this lovely Guarantee…
Yes, it offers a guarantee whereby if there is an error you will be refunded. Or, to put it another way, if there is an error, and you notice it, they will refund you your money that they shouldn’t of taken in the first place. Some might say that there is another reason why companies love them, and its linked to the if “you notice it” bit in the previous sentence. Now, please do not be offended oh delicate reader, but with the best will in the world, I have to say that I have come across a lot of people who are a tad lazy when it comes to checking their bank statements. That may well be you. Insurance companies love you paying premiums by direct debit because there is more chance you will renew with them because of this common chain of events:
The payment goes out monthly,
the renewal is sent,
a promise is made to shop around,
the envelope is put in the pending tray,
tempus fugits and the next thing you know is that the first payment of the new policy has been taken automatically.
A certain amount of muttering ensues and well meaning promises to do better next year are made.
Heres an idea –
SORT IT OUT NOW – DON’T WAIT UNTIL NEXT YEAR!
George’s step by step guide to living with the necessary evil that is Direct Debits.
1. Look at your bank statements for the last 12 months and note down every direct debit.
2. Put a question mark next to every one that you cannot immediately identify. Then, find out from your bank what they are.
3. Contact the companies in question and find out just what exactly you are paying for.
4. Immediately cancel any that you do not need any more.
5. Shop around to see if the rest can be arranged at better value elsewhere.
6. Buy appropriate amounts of cake with any money saved.
There, it really is that simple. Thousands of people are having money taken from there bank every day by direct debit using arrangements that either should have been cancelled or re-negotiated. Make a RetiredBroker happy and make sure you are not one of them.