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MONEY COMMENT
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When was the last time you wrote a cheque? I honestly can't remember how long it's been since I did, but it must be a couple of years at least. To tell the truth, I can't even remember where my chequebook is or even whether I ordered a replacement when my last book ran out. As it happens, I'm quite happy living without a chequebook. I pay all my bills by Direct Debit (DD), standing order or online bill payments. Wherever possible, I prefer to pay companies by DD, including energy firms, insurers, credit cards, and even my wife's optician. Also, depositing cheques is an inconvenient hassle: I'd rather have the money paid into my account by Direct Credit (DC) any day. Here are seven reasons why it pays to pay by DD and be paid by DC: 1. Uncashed cheques don't earn interest According to BACS, the automated clearing house that processes DD and DC payments, each year we leave more than 900 million cheques lying around for up to a week. Of course, while these cheques sit in our wallets and purses, they aren't earning us money, so we're losing out on interest. BACS calculates that the average company cheque is worth £1,700, while a typical personal cheque is for around £153. 2. Queuing in branches is a hassle One reason we don't deposit cheques promptly is that we simply don't have time to get to our banks. Just 1 in 7 of us (14%) bank our cheques on the day we receive them - the typical delay is six days. Also, we have to fit visits to the bank around our pressured working lives. Research from BACS shows that only half of employees (52%) find time to break for lunch and, when we do, it's for an average of just 36 minutes. That's why, as part of its 'Pay Me Direct' campaign, BACS is urging us to ask companies to make payments directly into bank accounts via DC (which is used to pay 90% of UK salaries). Also, individuals can pay each other via internet and telephone banking to transfer payments as a safe, convenient, no-hassle alternative to cheques or cash. Of course, BACS is owned by the major banks and building societies, so it's in its interests to keep down the cost of processing payments! 3. DD and DC are safer and more reliable than cheques We all know that cheques can be lost, stolen or damaged, and are often a hassle to replace. On the other hand, DD and DC rarely go wrong, when you consider the vast number of transactions that BACS processes. Indeed, BACS claims that 6 out of 7 people (86%) prefer to be paid by DC, yet employees receive over 22 million expenses cheques a year and the majority of insurance payments (57%) are still paid by cheque.
DD is also useful when we move house because, sadly, we can't leave our bills behind! BACS says that many people find changing their contact details for bills and missing payments more stressful than arranging a mortgage. In fact, one-third of us have missed payments because we overlooked bills when moving. 5. DD helps with financial discipline Paying by DD helps us to budget by allowing us to spread the cost of bills, avoid missing payments and save time. Plus, it helps with financial discipline: be honest, without automated payments, would you be able to pay ALL your bills on time? 6. DD comes with a built-in guarantee Critics of DD argue that it hands over control of our bank accounts to companies. However, if a payment is going to change, we should be informed in advance of the new amount and/or date. Furthermore, if payments are taken in error, we are entitled to an immediate refund from our bank or building society branches. 7. Paying by DD saves us money Best of all, the discounts that companies give to DD payers save us money - around £169 a year, according to BACS. Paying by DD means discounts on energy, water, telephone and satellite TV bills. Conversely, not paying by DD often means missing out on the best deals for personal loans, mortgages and so on. For tips on how to set up a DD and further information, including a service to request DD forms from various suppliers, visit www.directdebit.co.uk/signup