The 5 Minute Process that Could Save You Hundreds

16-Jul-2010

In these straitened times, you'd think that we'd be squeezing the most out of every penny.  However, UK consumers are apparently spending a staggering 150 million GBP a year on credit card late payment fees, according to new research from comparison website Confused.com.  This is the equivalent of throwing money down the drain, and it could all be avoided simply by setting up a direct debit to your credit card provider.

The research shows that 57.5% of credit card holders don't have a direct debit set up to pay off at least the minimum balance due on their credit card each month.  They are apparently paying the price for this oversight:  26% of cardholders have been charged at least once in the past 12 months for missing payments, 8.5% have been charged 3 times or more, and 1.2% have been charged 10 times or more!  At an average of 12 GBP a go, these fees are not cheap and you could be racking up hundreds of pounds of wasted income before you pay off your credit card balance.

Credit card holders over the age of 55 are the group least likely to be charged, but also interestingly those with the fewest direct debits, relying on memory to get their monthly payments made on time.  The 18-24 age group is the best at setting up direct debits, with 52% having one in place.  However it looks as though the remainder of this group is guilty of the most missed payments, as the average 18-24 year old was charged 0.83 times in the last 12 months.  So, the message seems to be clear: if you don't trust your memory enough to guarantee you'll make your payments on time, get the payments automated and avoid those pesky fees.

A direct debit only takes a few minutes to set up and is a free service available with most current accounts.   If you can afford to pay back a larger amount each month than the minimum payment, this is highly recommended to ensure that you clear the debt as quickly as possible.  Another tip is to schedule the direct debit to leave your account the day after you have funds, such as your monthly salary, coming in.  This way you don't have to worry about running out of money at the end of the month.  Banks will charge you a fee if you have insufficient funds to make a direct debit payment, so it pays to get your timing right!

Alex Higgs, commercial analyst at Confused.com comments "Setting up a direct debit to make a minimum payment on a credit card is such a simple thing to do, yet well over half of credit card holders haven't done it.  Collectively we are wasting millions of pounds each year on these charges, money which would be better spent elsewhere in these tough financial times.  

"As well as late payment charges, many credit card holders are likely to have lost out on attractive introductory deals or low interest rate offers as well.  These deals are often withdrawn if minimum payments aren't met, meaning more money is wasted as they are reverted onto higher rate deals. Missing minimum payments can also adversely affect customers' credit profiles, which may be detrimental when they want to borrow in the future."