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Should You
Direct Debt Your Car Insurance?
In the UK they are trying
to decide when it is a good idea to direct
debt your car insurance, or if you should
pay it when it is due by check or money
order. Some say that auto insurance should
always be direct debited because then you
don’t have to worry about losing a
payment, or for the mere fact that it is
more convenient. However, in some cases,
such as auto insurance, it could do more
harm than good.
Depending on the car insurance carrier,
sometimes it is not the best thing to do.
Reports show that eleven out of twelve
auto insurance companies actually charge
their clients for using direct debt more
than if they had not. It says that if they
use the direct debit method that they
could end up paying an APR of 22.7% for
the convenience.
That comes out to an additional £182 on
top of a £806 policy. The company says
that they are doing their clients a favor
by allowing them to spread out their
payments instead of doing one yearly
payment on their auto insurance premium.
They say they are loaning people the money
so that they have insurance, and thus if
they are in an accident over the first
month or two of their policy they are
still covered.
The APR can be anywhere from 7-37.12% on
the policy, so if you can afford to pay
the policy without direct debit, it would
be well worth it for you to do so. Take
for example that you have a policy that is
the previous example of £806 – with 37.12%
you would be looking at almost £300
additional each year. Some people will not
have the option of paying a £806 policy
outright, but for those who can you would
be much smarter paying the policy and
keeping the additional money for yourself.
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