“Unpaid Direct Debit Fee €12.70”
In an earlier life, that phrase would ruin my day. I’d stupidly forgotten to have cash in some account on a specific day for some unknown bill.
Lingchi is more commonly known as “death by a thousand cuts” was a form of slow torture used in China that would result in a slow, lingering and painful death to the victim. Direct Debits are the slightly less dramatic Lingchi of the consumer finance world.
Direct debits and instalment plans are a means of making people poor and keeping them that way. This post will teach you how to give the companies the middle finger.
(Note: If you at level 3 or above of the SP Game and enjoy automation this post is probably not for you)
The Corporate Vampires know how to suck blood from you over long periods of time
Or course the Directs Debits are pushed on consumers as an “Easy Payment Option” by spreading payments into monthly installments for a product or a service. Pro-tip: If you ever hear the word “affordable” from a company, run away.
Companies, banks and finance companies loves them and here is why…
- Banks or Finance Companies will charge a premium or interest for the provision of a direct debit plan
- Banks of Finance Companies will charge to fees for bouncing a direct debit
- It is in the interest of companies use direct debits as a means of spreading and managing their cash-flow
- Some utility companies (gas, electricity, broadband) will also charge you failed direct debits fee on your account
Let’s work through an example:
You ring up an insurance company and are offered an annual motor insurance policy for say €500. If you are a person “with your shit together” you will pay the €500 there and then. But more than likely you haven’t got €500 so the company offer a direct debit option of a €100 upfront deposit to be paid now and to spread the remaining €400 over 10 x monthly payments of €40.
By the end of the call the €10 x payments of €47.99 and you’re like WTF? So, you ask what’s the story with the extra €7.99 x 10? They inform you that another company Evil Finance Ltd is providing the direct debit plan and that they charge a fee AKA administration/service charge/interest/blood money. At this stage you only have €100 in your account to pay for the deposit, so you go for it. Sure it’s only €7.99 for fecks sake. You get your car insurance disc in the post and get on with your life.
Over the course of the next ten months, you inadvertently miss two of the direct debits. for whatever reason. Each time you notice a line on your online banking “Unpaid Direct Debit Fee €12.70” and you’re like “for fuck sake”.
€500 + €77.99 + €12.70 + €12.70 = €603.39!
That’s right, You have now ended up paying €603.39 for a €500 policy. In other words, you are paying 20% more than people with money. You’ve also spent time each month worrying if you have enough money at the right time for this direct debit and any other payments.
WARNING: if you are doing Direct Debit Installment plans for motor insurance, private health insurance, gas bills, electric bills, motor tax, life insurance policies and car PCP plans you are MULTIPLYING out the RISK of unpaid direct debits and the STRESS of trying to figure out how much you need at different dates in the right account.
What would Stoic Paddy do?
Stoic Paddy would give the companies and the banks the finger by getting his shit together.
1. Predict the future!
Bills and payments are entirely predictable. If you know when something will happen, you can prepare for it.
Go to your online banking and get a list of everything you are paying by Direct Debits.
Write down the month each renewal falls e.g. Motor Insurance Jan, Health Insurance April, House Insurance July etc.
Get a current quote for each of them. It will not be exact, but it will give a likely amount that you will need when the month comes around.
If it is a utility bill, just look at the bill for the same period last year for a rough idea.
Congratulations – you’ve just learned how to read the future!
2. SAVE in advance!
This is the hard part. It might mean giving up your Latte’s and old-fashioneds but put your grown-up pants on.
3. Pay Shit Upfront
Go in and cancel your direct debits one by one until they are all gone. Pay for each thing upfront as they come up.
Never worry about failing direct debits again.
“Hey Paddy, I prefer Automated payments”. If you are even asking this question, then you probably already have your shit together and have sufficient cash in a current (checking) account for direct debit/standing orders etc go for it.
There is something tangible about making manual payments online/phone which can be rewarding feeling after saving.
This or course will take the self-discipline and effort of sitting down once a month and working through.
I’m not here to judge either way. I just want to make sure that more of your money stays in your pocket and not in the bank/companies.