Monday, 6 February 2017

Direct debits, friend or foe?

Hello. I like to time my lunch with a listen to the BBC Radio 4 consumer programme, You and Yours at 12.15pm. In the introduction today it said there would be a topic on how to save money on your utility bills. I need to know about this I thought. 
It started with an interview where someone was talking about how they pay their quarterly paper bills into the bank with cash. It makes them more careful about how they use their gas and electric because it makes them mentally connect their usage to the actual cost of it. 
They said what I have been saying for years. They like a paper bill, and they feel more in control rather than having direct debits taken from their bank account. 
The advice given that to pay by a monthly direct debit will be cheaper, is true in one sense, but it doesn't give any incentive to cut down on usage to save money. The mindset is they are going to take the money straight out of the bank anyway, so we might as well use it. Because you are paying upfront and the money is moved from your account automatically, you tend to forget about it. Paying cash over the counter, (a cheque in my case), makes you more mindful of how much it is costing you.

By paying for what you use after you have used it makes sense to me. I don't want the hassle of them taking too much money from me, and me trying to get it back. My supplier does not impose penalties on anyone paying quarterly. They charge the same flat rate for everyone, and there is no standing charge.

I shall continue to stick to my guns and not sign up for any more direct debits, I will not do internet banking or phone banking, I will keep on withdrawing the cash I need from the machine inside the bank and use that to pay for most of what I buy. I use my credit card for petrol and food shopping, and any larger amounts which might crop up from time to time. I clear that every month.

Have a listen to the paying for utilities item on Radio 4 today. Move the slider across to 25 minutes. See what you think.

Thanks for popping in, we'll catch up soon.
Toodle pip

41 comments:

  1. I'm stopping my direct debit for gas/electricity. I got a few hundred pounds back a few months ago as I hadn't used as much as they had anticipated. My dd went down accordingly. Just had a meter reading and despite being a few hundred pounds in credit (again) they are going to up my dd from £72 to £129 a month! And I don't need to trouble myself, they'll do it all..notify my bank etc. Well, I don't think so! What a racket! I am having to wait to calm down a bit before I ring to cancel. I shall be like you Ilona and have a paper bill like the old days. My money will be staying in my bank, I'll just change the dd from them to my savers account so my money sits in my bank and not theirs. Grrrrrrr

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    1. Same as us! Got a refund then they took £10 and have just been clobbered for £450. Told them I cannot pay it all in one bit so have split to what the direct debit should have been before they *ugg*ered it all up.

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  2. hmm.. you've made me think with this article.. you're right that DD's are not helpful with appreciating how much gas/elec you are using. I did pay by DD but then stopped it. I now pay a set amount via standing order every 2 weeks,(so that i don't get lumbered with massive bills at the end of the month). Then I pay any balance owing when I receive the bill. This way I can still keep an eye on my usage.

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  3. I pay by DD and am very aware of my usage, which is around half of the national average. I want to keep my outgoings as low as possible and the only way to do that is to monitor my usage; I don't have the income to do otherwise and I know exactly how much goes out of my account in DDs each month. My water is metered and is also paid by DD. I have never had huge increases in my monthly payments for any of my utilities. My Mum pays quarterly and never monitors her usage, but she has a larger income than me, and a winter fuel allowance; I think how much someone uses depends on the person, their financial situation and their priorities.

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  4. I'm going to look into this as I'm sure I could get our bill down doing it like you do, Ilona. As for Smart Meters.....I'm trying to avoid these for as long as I can. I already know my usage - I submit readings every month.

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    1. Be wary of Smart Meters, they give off a lot of radiation. Refuse to let them install one.

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    2. The radiation thing has not yet been proved. Saying that, I don't want a smart meter, it's too much big brother is watching you for my liking.

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    3. do we have to have a smart meter or is it still a choice at the moment?

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    4. It's still a choice. You can refuse to have one.

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  5. I prefer paper bills and paying cash at the Post Office or Bank. I don't do DDs or online shopping as I might be tempted to spend more with not seeing actual money handed over. I hardly use my debit card these days.

    I worry about the future as I'm sure we are being pushed towards a cashless society. It would make it easier to be tracked all the time if coins and notes no longer existed.

    Elaine (Oldham)

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    1. Hi. The only time I use my debit card is to withdraw cash from the bank. I don't use it for shopping.

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  6. I pay by direct debit and I'm always looking for way to get the cost down. It's £18pm at the moment but I know that's going to be recalculated soon so I shall look at changing providers.

    Cash in my purse doesn't work for me either, it just gets frittered away on small spends, I'm much more careful with a credit card.

    I think different things work for different people.

    SouB

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  7. Good post, Ilona. Here in Canada, there is a real push to have direct debit withdrawal from your account for all kinds of things. More than one financial advisor says to stay away from that, especially if you are trying to get out of debt. My daughter-in-law does on line banking, and accidentally punched in the number $1500.00 to pay the phone bill, when she really meant to punch in $150.00. She immediately contacted the phone company when she realized that they had taken out the larger amount. The phone company agreed that there had been an error, but it took her 5 & 1/2 months to get them to reverse it, and put the money back. They kept trying to give her a credit instead. My daughter-in-law and son are quite well off, but if they were on a lower income, that with holding of ten times what the phone company was entitled to, could have been disasterous. We regularly hear about companies taking out two payments instead of the one they are entitled to, and the struggle on the phone to get the error corrected. We have our electricity on a monthly averaged out pay plan, with the credit or left over amount due and paid up on the anniversary of the one year contract. It is a challenge for me to see if I can get a credit every year on the anniversary. I pay in cash at the bank with a paper bill in hand, but many utilities are charging a penalty called a "paper billing fee" for doing this. I will pay the $2.00 or$3.00 penalty, and be more secure in knowing exactly where my money is going, and how much it is really costing me. Mary Jane in Canada.

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  8. Thank you for that post. I pay all my bills by direct debit or I do a bank transfer. I do online banking and i don't want to queue up to hand my money over or even to take it out of the bank.

    However my parents pay their bills in cash and do the very same as you. It was good to hear a different point of view as to why. I will think twice in the future about trying to convince them to change.

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    1. Hi, I don't have to queue in my bank. For payments I complete a slip and a cheque and put them in an envelope and post it into a hole in the wall inside the bank. For withdrawing cash, I use the hole in the wall cash machine inside the bank. No queuing.

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  9. I use direct debit a lot but I have a sort of chart with all payments on and I check my statement online almost daily and tick payments off as they are made so I'm very aware of where I am with it all at any given time. It works for me and it means I don't get behind. Going into town to pay is expensive so it's better for me this way.
    As far as I'm concerned, money paid by debit card is money gone just as much as notes handed over!
    J x

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  10. I always liked the old fashioned envelope system. You budget for your bills so there is no anxiety when it comes time to pay. I liked walking to the post office to pay the bills and have a little think about what I was paying for as I went. I was more conscious. Of course automated bill paying has removed that consciousness. Now it just happens. Not good. I am not into paying my bills in advance to the utilities either. Every cent paid in advance is profit for the utility. I imagine they invest this money earning interest or gains through the money market.

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  11. All our utility bills arrive as emails, it's then a simple mater of setting up the payment when due by internet banking. Don't have a check book, why would you?

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    1. Hi Paul. I like cheques. I pay my gas, electric, water, and credit card bills by cheque. I prepare the payments at home, put into a bank envelope, and post directly into the bank paying in hole in the wall. Saves having to withdraw cash first and faff around in the bank. I also send charitable donations in the post with a cheque.

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    2. I guess you could say I do the same only my cheques are electronic 😊
      Our bank account also has no fees !

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  12. I do online banking and have never had any problems with it (it is quite far for me to reach a bank and not convenient). All my bills are paid by d/d and I check every couple of days to see what has come out and what will shortly. I get a discount with some suppliers for paying by d/d and, for example, if I know that my dual gas/electricity bill is going to be higher than the usual d/d I can put the money across so it is back to a zero balance for the next invoice so they don't keep hundreds of pounds of my money in their bank account. Ilona, since reading your blog, the biggest change I have made is that I write everything down on a calendar - incomings and bills out - so that I am totally aware of what the month's expenses will be (thank you for this tip). Amanda

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  13. I guess it comes down to your individual lifestyle. For me it's been direct debits for a long time. We are though mindful of our usage and keep a close eye on the debits, so we know exactly what level they're set at. For eco reasons we've gone over to paperless for most of our bills, but we've kept the odd one paper based as we've found that we need them for providing id and evidence of our address. ARilx

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  14. I pay my bills in cash at my local store which has a Payzone. Its just across the road so no traveling involved. I also buy my gas there and top up my phone. No Direct Debits for me.

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  15. I've always gone by the mantra that the only person who has access to my bank account is me. I hate big corporations and resent the way they like to get everyone signed up, I don't trust them to take the correct payments and I don't want them making any more money out of me than they have to. I save money by turning off the heating when I need to cut the bills and so on. Like you, Ilona, I still use cheques. I'm aware I am sometimes paying a charge for this, but I still prefer the feeling of being in control. I would never keep track of direct debits...though I respect that others may feel differently and as has been said, what works for one person doesn't work for another. I do think that the use of direct debits, contactless and so on does not help people who have problems managing their money, as it makes it all so easy to buy this and pay for that, without really thinking how much one is spending. I hate the way companies across the board keep pushing for direct debits, I suspect there will come a point when we are simply forced to have them, but that will be an unhappy day for me.

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  16. Direct debits all the way for me it just happens everything paid for spend what's leftover at the end of the month. Savings are done by dd to.DIdn't even know you could still have a cheque book thought banks stopped issuing them years ago.

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  17. We've been on d/d for gas and electric for years with no problems. You pay the same amount every month so you're building credit up in summer to use in winter. It only seems to be a problem if its a cold winter where they put the d/d up to cover it but they revise it down say after a mild winter. We get statements showing how much credit we are in and we even got a small refund the other week.
    Dave.

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  18. We've been on d/d for gas and electric for years with no problems. You pay the same amount every month so you're building credit up in summer to use in winter. It only seems to be a problem if its a cold winter where they put the d/d up to cover it but they revise it down say after a mild winter. We get statements showing how much credit we are in and we even got a small refund the other week.
    Dave.

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    1. Well, that was always the case for me. But this week I've had a bill and e-letter from British gas/Sainsbury and I can't understand why I got a refund of hundreds of pounds a few months ago, am still in credit by £200+ but my dd's are going up by £57 a month dual fuel. That's a lot of money. I'm a careful user of fuel, have a new (2014) gas combi boiler, 5 (turned low radiators) in a small 1 1/2 bed house. I have an induction hob and haven't used my big oven or in over 12 months. I did hear a news report that electricity was going up by 15%.. I think this topic will really kick off but I'm stopping dd's which I've done for years.

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  19. Something that hasn't been talked about is the social isolation that on line and automated payment systems create. If we do avail ourselves of the bank in the town or the Post Office in the village to withdraw money or pay bills we interact with people . Constantly we are being told that more and more people report as " feeling isolated and lonely " . Being able to run our lives without leaving the security of our own homes is so much easier than in the past.

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  20. I am sure that there is quite a disparity between what I have paid to various providers and what I actually owed. Oddly enough, in their favor! My favorite example is when I went to an office of our cable tv company (we don't do cable anymore) to trade in some outmoded piece of equipment. The clerk "helping" me was training an assistant, and as she pulled up my account on her computer screen (which I could not see, of course), she drew in her breath rather quickly and mumbled something to the assistant about "yes, well, that seems to have been a double charge," then turned to the aged person in front of her and said more loudly "I think we can get you a better deal!" From previous arguments with various service providers I knew it was useless to ask about the "double charge," especially since it's never quite clear whether one is paying for the month in advance, or for what dates one is actually being charged. So I try to keep current with any bills, and have as few obligations to those mysterious providers of various services as I can. And for anyone trusting of the banking system (at least in the US) it might be informative to read about Wells Fargo's frauds on their customers. I'm not saying to hide your money under your mattress, but I agree with those who have said "pay attention!" Thanks for an interesting post Ilona. Kate in Oregon

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  21. You are so lucky to get monthly bills! Our meters are read once a year, and then we pay a monthly amount for the next 12 months based on what we used the last year. When I started saving on our use of utilities, I read our meters every Sunday to see how much we had used during the week.

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  22. The only direct debit we have is an insurance bill. I pay a lot of bills through on line banking. Our electricity is equal pay and billing a couple years in a row went down because of how I monitor the heat/ac (summer). Also have put in LED lighting in light fixtures. That's help cut cost quite a bit. Shutting off lights when not in use good as well. Good thoughts, Ilona

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  23. Hi Ilona, we've set up standing orders for utility companies (we control standing orders, NOT the company who gets the money). The gas and electric both gave us over estimates for a d/d - we set up standing orders for about two thirds of what they said, we pay enough to put us in credit at the beginning of each winter period to allow for extra heating and light in winter. We adjust the standing order if we think we need to, (when the price changes), it works well for us. We use internet banking - we use different banks and they've both been very useful, no problems. We pay cash for everyday things, food, petrol,dental treatment, vets, anything we're unlikely to return. Items which may have to go back - DIY stuff, clothing, or expensive items, they go on the credit card and it's cleared when it appear on the statement. I love having no debt - I have had a few large bank loans past when I was working(apart from my mortgage) but never more than I could repay - when I think of the interest these cost me I shudder - but you do what you have to at the time, and when you're younger saving up for large purchases requires such a long wait, and if your car's died well, you sometimes have to borrow. Smart meters are a choice - and not for me, there are articles on line for anyone who isn't sure about them. Phones - still have a landline - have a pay as you go for when I go travelling. My landline calls are in a package so I can call anyone anytime for zero - living away from family makes this very worthwhile for me. I think we all have to choose what suits us best, my ways have changed a little since I've retired, but even when I had less time I never forgot whose money it was, and how hard I was working to produce it. Lovely video of Rocky, much love, Elainexx

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  24. I pay by direct debit, although our electricity bill is currently only £26 per month as we have a woodburning Rayburn and from it we eat, heat and bathe. However I still read my meter on the first of every month, put it on my online account and then check the effect it has on my usage. We do get our meter read periodically but I never rely on just that. We live 13 miles from the nearest bank so popping to pay bills is not the best option. I do not do online banking but take a statement from the bank each week we go into town and check off bills, receipts and everything else to check we are on track.

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  25. Hi just wondering how you pay your Internet connection.? Every company I see wont accept you paying upfront cash for example.i feel the same as you pay ahead or use and pay...what's wrong with that? What's wrong is that the company hasn't got you in their clutches! Society doesn't want you to have control of your own money... True!

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    1. Hi. I have a landline and internet package from EE. I don't have a choice with that one, it has to be direct debit.

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  26. I hate DDs with a passion, I prefer to have control over how and when I pay for my utilities, not the company. Half the features on BBC Watchdog are about companies taking money via DD even when the contract has finished/customer moved/loan paid etc.

    Just to change the subject - have you ever driven a car transporter? Saw one today and thought of you, in fact when I see different types of lorry on the road I'm always thinking "I wonder if Ilona has driven one of those!"

    Linda x

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    1. Hi Linda. That's one of the few jobs I didn't do. It is a little bit more specialist, but not beyond the average HGV driver to learn. Just never applied for that type of work. Another job I didn't do was livestock.

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  27. i got fed up with direct debits and had pre payment meters put in.i had to wait a few years for the electric one as it used to be if you werent in debt then a charge would be payable for having pre pay put in.i know it isnt everyones cup of tea but i never have a bill and i know what i can afford.suits me for the time being.

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  28. We pay by direct debit, and give them a reading every month so we are paying just for what we use. We are also with one of the few companies that charge the same per unit, however you pay.

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  29. we pay monthly by dd and have a smart meter and its fine, I get the best tariff from british gas each year, I on free electricity on a sunday tariff at the moment, its brought my monthly dd down by about 15ukp a month. all bills are by dd, our joint statement shows all our bills I check them monthly on the statement and file it away, I keep a spreadsheet for when something has changed, so I can find another supplier or whatever. it seems to work for us. Julie T

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