As we start the New Year, there is no better time to start ‘afresh’. While none of us have any natural inclination to want to make finance management a New Year’s resolution, it can give us a pause for thought, to review how we want to spend our money over the year.
Many people are still paying large lump sums of money annually, or quarterly, for utilities or services, as opposed to smaller, more manageable payments over 12 months. We’re raising awareness of the benefits of direct debit, and giving it the kudos it deserves for making our lives a little bit easier. In fact, we’re downright determined to highlight how convenient it can be.
Think of direct debits in terms of one big cake. We know cakes are much better on the palate, but bear with us. While the cake may be great to demolish in one sitting, you’ll find it far more comfortable to pace yourself and eat it once slice at a time.
What we are trying to say is that by spreading your utilities or insurance payments out over a year, you’ll enjoy a better cashflow. You’ll still enjoy the same services you had before, it’s just more… palatable.
Here are a few direct debits that many are still paying out as an annual or even quarterly lump sum. It’s easy to switch to direct debit and enjoy the convenience it brings with it. You’ll probably find the details on the back of a bill or renewal letter, on their website, or you can call their customer services to get it changed over.
Council Tax payments over 12 months
We feel that too many people are still paying their council tax manually, or via payments over 10 months. It makes little sense to us that you have to pay high payments for 10 months and then none for two months – least of all make it a manual process in a world of direct debits and automation. Instead, set it up once, put your feet up and enjoy the payment going out on time, every month, at a lower fee.
Although the ‘pay more for 10 months, then nothing for two months’ payment structure may suit the council, times have changed. Your council may not even advertise it, but you are perfectly entitled to spread your council tax payments out over 12 months, via standing order or direct debit, without penalty, easily.
How to do this? Just call your local Council Tax office and let them know you’d like to pay via 12 monthly payments, their number will be on the bill you will receive shortly. For the more computer-savvy, some councils even offer this option online.
Pay for your NHS prescriptions monthly
Even though we have the NHS, paying for prescriptions is still costly, and usually inconvenient. For the self-employed, having to pay out for a bag of medication while being unable to work due to illness really can add insult to injury, or illness.
A prepayment certificate – or PPC – could help you save in the long run, especially if you purchase four or more prescriptions in three months, or 12 or more prescriptions in 12 months.
It covers all NHS prescriptions, including dental prescriptions, no matter how many items you need. A three-month PPC currently costs £31.25, while a 12-month option costs £111.60. If you opt for the 12-month PPC, you can either pay upfront or in 10 monthly direct debit instalments. There’s also HRT-specific PPCs, which could save you even more money.
For example, if you need two items a month, you can save £120 with a 12-month PPC, save £235.80 for three items a month, and £351.60 on four items.
Check whether you’re entitled to free prescriptions before you apply for a PPC, and then take a look at the NHS website and buy your PPC online. It will help you avoid a price shock if you fall ill or get injured!
Monthly BBC TV License Fee
With the news that the BBC TV License Fee is rising, how can you make the payments easier? The current TV license fee is £159, per household, but from 1st April will increase to £169.50 a year. Since August 2020, everyone aged 75 and over needs to pay up, even those who are blind or sight impaired are still legally required to pay, albeit reduced by 50%. This is a lot of money, particularly if you are unable to work because of your disability.
Traditionally, many have been paying the fee annually, or quarterly (which includes a £1.25 charge), often in person. Why bother when it’s so easy to switch to direct debit online? If you are paying by direct debit for the first time, you may need to pay £26.50 over six months, prior to it rolling into a regular 12 monthly bill of £13.25 per month. These figures will be slightly higher, but not by much, when the price rise comes into effect.
Although we can’t reduce the license fee, it may be easier to pay this over a 12-month direct debit, which continues to auto-renew, meaning that you will not be at risk of breaking the law either. Once it is scrapped, your payments will simply stop. No cancelling, no paperwork, what could be easier?
Pay insurance premiums monthly
If you have always paid your insurance premiums in one lump sum, consider the convenience of direct debit. Most insurance is payable monthly which can really help you to keep on top of your finances.
With insurance premiums on the rise across the industry at the moment, we have already advised many clients who pop in to see us to consider direct debit. Not only does it mean you don’t have to find this suddenly increased premium funding immediately, but it provides the convenience of simply rolling over. You can still change providers at renewal, you can still make mid-term adjustments, but the stress relief it can bring to spread this out safely via direct debit can be a big win. Spreading the payments could be a great option right now, to avoid putting strain on other areas of your budget. It’s also worth mentioning that it can improve your credit score as well!
So, when it comes around to your renewal, and if you have previously paid your insurance(s) annually, talk to your broker who will be able to compare the costs for you, and any interest rates if applicable. They can also assist you in finding new ways to reduce your premium, making sure you only pay for what you need. Contact your local branch if you’d like to discuss this, you can find yours here.
Spread the cost of Car Tax
Many are still heading to the Post Office to pay their car tax, usually in one lump sum. This trip can be avoided entirely by paying by monthly direct debit. In fact, you’ll save even more by not using your fuel, every penny counts after all. So, when you receive your next reminder, why not switch to a regular direct debit instead.
If you still prefer to speak to someone, did you know that you can actually set up your direct debit at the Post Office? But even for the less tech-savvy, a visit to the government’s official website will set you up within minutes.
With your MOT and insurance now logged online via a central database, all you need is your reminder letter to hand, which will contain a 16-digit reference number, and the system will advise you of your options. It is, genuinely, a very simple process to set up. Your payments will continue to roll over to ensure you never fall foul of the law and you can still cancel it and claim back any overpayments when you sell your car by completing the V5 appropriately.
Avoid a utility bill price shock
For many years, water bills were paid in large, quarterly payments – and it is estimated that there will be a £35 per annum price hike for water this April. Teamed with the fuel price increases hitting our wallets hard last year, manual or quarterly payments simply aren’t sustainable – or safe – for many. After all, if we can spread the cost and avoid the Post Office queues during a pandemic, it makes sense to try.
Like mobile phones or Wi-Fi, all utilities are payable by direct debit. Spreading out utility bill payments over 12 months as opposed to four could go a long way to avoid a price shock – and if you do that for all your bills, not just one or two, you’ll know exactly where you stand each month.
When it comes to your gas and electricity bill, the months you are using less fuel, your account will be in credit, ready to absorb some of the costs of winter. Although this can take a little while to build up, it goes a long way to ease the burden of price shock. Simply contact your providers who can set this up for you over the phone. Take a look at our energy price cap guide for more details on this.
Also, never feel you have to stick with the same utility supplier, the process to switch is very easy once you approach the end of your current tariff. This could even include services such as your internet, or Virgin or Sky.
Will you make life a little easier?
Direct debits are very simple to set up, with the added bonus of being viewable via your online banking if you want to review your monthly spend. The best part is that you have regular proof of payment, and remain in complete control and able to monitor your spend effectively.
Although there may be small fees associated with some services to pay in monthly installments, they are usually relatively low, and many find the budgeting, convenience, and the added benefit of visibility and full control, is worth a couple of pounds more a year.
Our helpful Howden branch teams are happy to help any clients switch to direct debits, as well as support you with any other insurance queries. Simply get in touch with your local branch who will talk you through it, and where appropriate, help set it up for you.