How Bounced Payments Can Cost You Much More Than Just Bank Charges
- People who miss payments often end up paying much more than just charges from their bank account provider
- Lenders typically charge up to £12 for late payments, but some charge more
- Someone who misses several payments in one month could end up paying more than £150 in charges
With 42% of current account holders having paid bank charges*, many people are familiar with the cost of a bounced (or returned) Direct Debit. Most basic bank accounts and bank account providers will charge for a rejected payment, with some charging up to £25.
It’s also not uncommon for third parties to charge customers for bounced Direct Debits too. Following research made by thinkmoney, various service providers have been found to charge customers on top of the charges their bank account providers will make for missing a payment. Loan and credit card providers were found to typically charge up to £12 for a bounced Direct Debit, with some cancelling promotional rates with customers who fail to make a payment on time. Cutting customers from promotional rates could potentially cost £100s in interest.
In a particularly bad scenario, a person could end up owing £100 to their bank for bounced Direct Debits from four services, such as a mortgage, credit card loan, cable television and home phone. This in itself is a lot of money to be paying out in banking charges alone, but when paired with charges made by third parties – the total could rack up to more than £150.
The results can be seen in the table below.
A selection of bill issuers and what they charge**
Catching up with a missed payment can also throw up a few difficulties, as in some cases the provider may take a double payment the following month in order to reclaim the money owed to them. However, it is likely that a customer will struggle to make the initial payment again the next month, without the addition of any existing debt they owe from a previous missed Direct Debit.
Getting more than a month behind with certain payments, such as a mortgage, can lead to further charges and action from lenders.
“Missed payments can end up costing you a lot more than you realise,” said Ian Williams of budgeting account provider thinkmoney. “Although many people are aware that a bank will charge you for returned payments, charges made by the company itself can often prove to be an unwelcome surprise, as can losing access to their services and losing promotional rates or good deals.
“If paying your monthly outgoings on time is something you struggle with, having someone to ensure all your bills are paid on time each and every month could be ideal. thinkmoney’s Personal Account ring-fences the money to help ensure that all your bills are paid in full every month. What’s more, if you do miss a payment we won’t charge you extra for doing so – which is one less thing to worry about.”
Providing a built-in budgeting service, the thinkmoney Personal Account comes with a straightforward monthly management fee of £14.50 (£21.25 for join accounts) – and no charges for rejected or missed payments.
*Research carried out by Opinium Research, with an online survey of 2,015 UK adults between 29th and 31st January 2013. Results weighted to nationally representative criteria.
**Based on research of providers’ terms and conditions conducted week commencing 10th June 2013.
thinkmoney provides an alternative to a high street bank account that makes it easier to budget. The account ring-fences money needed for regular commitments, like bills and savings. It also comes with a ‘Money Manager’ service to help customers to manage their accounts.
thinkmoney Personal Accounts don’t require a credit check and are available to UK residents over the age of 18 who can prove their identity.
SOURCE thinkmoney http://www.thinkmoney.co.uk/