Basic current accounts and Direct Debits

bert1fegg

The article on basic bank accounts says this:

Because you can't go overdrawn, you need to make sure you have enough money in the account to meet any payments. There's no fee from the banks for this, though you may face late fees or arrears charges from the company or organisation you were trying to pay.

However, if you try to make these payments too often without funds, there's a possibility these banks could cancel your direct debit facility, or close the account. We've heard of it happening, though we don't think it's common - and the bank should write to you before it does this.

I'm not awful at money and I have a decent credit rating, but I'd like to have an account that I don't have to constantly be worried about and having to check it every five mins, including for DDs.

It strikes me it would be awfully simple for a bank to stick an algorithm in a basic account that tots up the direct debits for the month (or some period) and treats that as absolute zero. For, for example, if you have a basic account with bills on Direct Debit which total, say £180 a month, then the account never lets you go below £180. Then you never have to worry. If you go to a cash machine and try and get some money out and it doesn't let you, you just live on dry pasta and curried rat or whatever until you get more money. No stress. Never quite being sure if you have enough money is way more stressful than simply being poor by itself.

Does anyone know of any such options?

eskbanker

bert1fegg wrote: »

It strikes me it would be awfully simple for a bank to stick an algorithm in a basic account that tots up the direct debits for the month (or some period) and treats that as absolute zero. For, for example, if you have a basic account with bills on Direct Debit which total, say £180 a month, then the account never lets you go below £180. Then you never have to worry. If you go to a cash machine and try and get some money out and it doesn't let you, you just live on dry pasta and curried rat or whatever until you get more money. No stress. Never quite being sure if you have enough money is way more stressful than simply being poor by itself.

Does anyone know of any such options?

Many posters on here make suggestions for things that sound very simple at a conceptual level but are unworkable in reality, but this one would be highly flawed even if it could be implemented - I don't know how many people have completely fixed DD amounts month after month for a start and even if they did, what happens when they change utility suppliers, etc.

Have you looked into getting a second account for bills? Many people find that this is a good way of managing your scenario, i.e. after being paid, transfer the projected monthly total for bills (with perhaps a bit of contingency) into the bills account and no need to worry thereafter....

bert1fegg

Yes I have another account at the moment but it still isn't simple.

I don't see what difference it would make if the DD amounts kept changing. Computers are good at this kind of thing. They can recognise which transactions are DDs and work it out month by month. Half a day's work for a boffin to figure out an algorithm instead of millions of man hours of people checking balances and fretting over whether or not they have remembered a DD or not. Why do something that a computer can do much better?

Thank you for answering by the way, having another account for DDs is the next best thing I guess, but I still screw up quite a lot.

Shakin_Steve

What the banks are basically saying is 'Please learn to budget, we are not going to do it for you'. Take the figure you pay in every month, subtract the money you know is going out, and don't spend any more than the amount you arrive at.

northwalesd

bert1fegg wrote: »

I don't see what difference it would make if the DD amounts kept changing.

How is the algorithm going to know if your mobile bill this month is going to be the bog standard £12 you're contracted for or £50 because you've decided to call dodgy numbers?

I wouldn't see a queue forming for this kind of system personally.

eskbanker

bert1fegg wrote: »

I don't see what difference it would make if the DD amounts kept changing. Computers are good at this kind of thing. They can recognise which transactions are DDs and work it out month by month. Half a day's work for a boffin to figure out an algorithm instead of millions of man hours of people checking balances and fretting over whether or not they have remembered a DD or not. Why do something that a computer can do much better?

You're still missing the point about predicting DDs in advance (many, including me, pay massively variable credit card bills by DD for example, values not known to the paying bank until called) but if you're convinced that what you have in mind is (a) in any way practical to implement and (b) in great demand, then I'm sure the banks will be delighted to hear from you and bite your arm off to cover you with royalty cheques for use of your fabulous idea....

bert1fegg

You're still missing the point about predicting DDs in advance

How is the algorithm going to know if your mobile bill this month is going to be the bog standard £12 you're contracted for or £50 because you've decided to call dodgy numbers?

Oh, yes, fair enough. That does indeed make it impossible to easily do.

What the banks are basically saying is 'Please learn to budget, we are not going to do it for you'. Take the figure you pay in every month, subtract the money you know is going out, and don't spend any more than the amount you arrive at.

This is, of course, very good advice. The problem is I find it extremely difficult to do for several reasons (not just because I am lazy and stupid). Staying in control of money when (a) income significantly exceeds outgoings so you can get away with rough guesses and (b) the budget is very simple, is easy. But when it's very complicated and income and outgoings are about in balance, then I find it really hard. Boo hoo, you might say, try harder. But there is a limit to what I can do - I am already having to make choices about what I spend time thinking about. And I (mistakenly) thought that there might be a simple and obvious solution, but I guess there isn't.

Anyway, thanks for helping me think about it.

eskbanker

You might find it helpful to complete a Statement of Affairs in the format of http://stoozing.com/calculator/soa.php or similar, as this is likely to help you analyse your spending versus income and assist with identifying areas for improvement. Other budgeting tools are also available, YNAB (You Need A Budget) gets mentioned on here sometimes and there are no doubt others....

Dobbibill

How about a separate account for you to withdraw at the cashpoint with, thus leaving your £180 for DDs alone.

Followed by text alerts for either/both of your accounts.

Anthorn

I differ from the above posts: It would be simple to total the expected incoming funds and compare it with expected monthly outgoing funds and warn the account holder if it's about to go wrong.

The only free when in credit account I know of which does that is "B" through its mobile app from Clydesdale/Yorkshire banks and adds in planned savings in savings pots for good measure.

A prepaid account which also does that is Thinkmoney but it is for people who cannot budget for themselves and costs £17.50p per month.

Several banks such as Lloyds Bank have text messages to warn when the balance of a current account falls to a pre-configured amount.

https://www.youandb.co.uk/the-app/gain-insight/
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