Are you paying more because you can’t pay upfront?

Mumoffourkids

I went through a patch last summer where after the breakdown of my relationship, I was struggling with money. My tax credits went from a joint claim to a single claim and were stopped. They initially told me it would be for two to three weeks but ended up being eight weeks. I do work but only part time so I did have my wages and child benefit still coming in. However my wages didn't even cover my debt let alone my other bills. I had to take out a payday loan in order to pay the nursery fees so I could go to work to still earn money. I had to borrow from my dad to pay my rent. I ended up at food banks to get some food to feed myself and my kids. And then my house insurance was up for renewal. I didn't have any money spare so I had to pay for it in monthly installments.

I am lucky in that this was only a temporary situation and that once my tax credits were restored I was able to sort out my budget. Recently I have just paid my car insurance annually rather than monthly because I have the money to save for it each month. And I will be paying for my house insurance annually when that comes up for renewal.

That time when I had no money was very hard and things were just made worse by having to pay more because I couldn't afford to pay up front.

louloufox

iolanthe07 wrote: »

When I was young and broke, banks used to have an account called a 'budget account'. You agreed an amount for the year, divided by 12, and paid into it monthly. Bills (usually quarterly) would be paid out of this by cheque when they became due and the thing would balance itself out over the year. At the end of the year you either made up a shortfall or the bank paid you any excess. This worked really well, cost very little, and I can't imagine why these accounts were dropped. They probably didn't make enough profit for the banks.

We were in the same boat as you when were younger and also had a bank operated budget account for years. It really helped us and got us in good habits. A few years ago i realised i could do the same with a simple savings account with the same bank with no charges. Simples.

kallybear

1. Childcare - my partners work only schedules 8 weeks in advance and his holiday is only given to him quarterly - this means we dont know if we will need holiday clubs etc until 8 weeks before hand which means all the early discounts have stopped and all the cheaper places have been snapped up - he is only on a 16 hour contract so we cant afford to put them into childcare if he isnt working but we dont know if he will be doing 16 hours or 45 hours during the holidays an he cant book time off that far in advance

2. Higher energy costs - on a prepay meter for gas and electric that we cant change to regular due to the landlord

3. Speeding ticket - my only one ever - i was unable to pay for the speed awareness class so had to take the points on my licence and the fine which was 4 times as much but could be paid in installments which also put up my insurance so i can no longer afford to run a car

4. Renting - my landlords are discussing selling the house - but there is no way for me to get a deposit to get a new property as the one from this place wont be released until after we have moved so somehow we will have to come up with the money for a new deposit and wait for this one to be returned - if they go ahead this will have to be paid for on credit

4b. this also locks us in - whatever rent rises my landlords want to charge they know they can as we dont have a way to move out - there is no choice other than to accept it and then somehow find the extra money - they will never do more than a 6 monthly contract so they can raise the rent every 6 months

5. A yearly travel ticket is almost half the price of a weekly one but i never have enough to pay for it all at once even though that is my only way of getting to work

6. Not being able to plan ahead - with my partner working varied hours and with tax credits being stopped 3 times in the past 18 months for errors on their part there is no way to plan expenditure and saving because every week is different - we manage to save £50 one week and then are £75 down the next

7. having to live in a rubbish area - for the 2nd time in 3 years my partners bike was stolen tonight - his mode of transport to get to work and back - now we will have to pay for the bus while we try to replace his bike - the bike saves us money but we cant afford a new one because we have to spend the money on transport for him

7b. He cant get the cycle to work scheme or anything like that as it would take him under minimum wage - his work has been delaying his payrise for 4 months as his area manager hasnt signed off his new training that he completed in november 17

7c. higher insurance costs as its a terrible area for crime which has to be paid monthly at a 15% mark up because we cant afford to pay it in full once a year

8. Shoes / clothing - on top of having to pay childcare over the summer then comes the big back to school shop - where my 11 year old who wears an adult size 5 shoe needs - school shoes, trainers, plimsolls, football boots (and from next year astroturf boots as well) and my 8 year old needs the same minus the football boots - there is no way to pay for this spread out - no way to buy in advance (my children do this really annoying thing all the time GROWING!) and no way to buy anything but the cheapest which means the school shoes are almost certainly gone by october half term - trainers and all the others by xmas (if not sooner) when we do it all again - this is all on top of normal uniform and PE kit etc - with big one going up to secondary school in September we are now looking at a £30 blazer plus £11 jumper plus £6.50 per shirt (will have to buy one and wash it each night so god alone knows how long that will last) £4 for a tie and £15 for a PE Tshirt all uniform mandatory and only available from their preferred supplier - plus trousers and shorts from the supermarket

8b. this also means i will need to run the washing machine and tumble dryer every night to ensure there is clean uniform for the next day which will cost me more than an extra shirt quite quickly but because i am having to spend it out all at once this is unavoidable

9. Debt (lots of it after a messy break up) quite often i receive letters from my creditors offering me 50-75% off my debts if i pay them in a lump sum - i pay £1 to each of them as part of a DMP- some of them could be gone with £100-£300 payments but i cant afford them so i have to keep going for god knows how long with paying each of them

mr-mixalot

Like other I to got into debt in my 20's to the tune of 12k
(Even though I worked for a bank, their debt advice was get a bigger loan and consolidate everything which was the in thing)

This resulted in me defaulting on my mortgage and that brought it's own raft of problems

I then got married and did the 'rob Peter to pay Paul routine for a few years, whilst keeping all this secret from my wife, I was lucky I still lived with my parents but still paid 'board' as that was how I was brought up

We then had 2 kids and we had issues so separated and wife moved to a different town with
the children

I then finally got my head out of my !!!, reconsolidated & managed to clear my debts about 10 years ago & have never paid for credit ever since, always pay off my credit card, budget liek a pro & save for everything I need

I also got back with the wife and moved back in with her, got an excellent paying job which is 20 mins walk from where we live which means I could get rid of my car as we didn't need 2

Now we are trying to save a deposit to buy our forever home so still caught in that trap, not sure its something I can escape

vintner55

I would really like MPs to consider older people who do not have access to the internet. My father is 89 and I have persuaded him to have broadband so when I go round there I can access the internet and help him with online accounts. Some people don't have anyone who can help them with this and I know that without me he wouldn't use the internet at all as he finds it intimidating.

I also have a 90 year old lady that I visit sometimes. She is living just on the state pension and finds it hard to afford heating. She doesn't have access to the internet at all. She has medical conditions so can't get out much either. I have been doing comparisons for her at home for her electricity but it is frustrating how most of the cheaper companies require online account management. This is not something you can select for when using a comparison site and involves reading the terms and conditions of each tariff or ringing them up. If a tariff is available with paper billing there is always a premium to pay of around £25.

It is all very well having more suppliers and a competitive market for necessities but some of the poorest and most vulnerable people are effectively excluded from the cheapest deals. This also applies to gas, telephone, insurance. I think the larger players in each industry should undertake to have their cheapest tariffs available offline for persons over 80.

iolanthe07

She is living just on the state pension.

No one should have to live just on the state pension. She should be entitled to a top up (used to be called Pension Credit iirc) to a minimum of £159 a week plus help with rent and council tax. She may need help claiming this.

CrazyCatLady

Reading kallybear's helpful and insightful post reminded me - bus fare. I pay £80 for a month bus ticket to travel to, around and from my nearest city regularly for work etc. That's £960 per year, whereas a year ticket costs just £840. That's a saving for the year of £120. Another "poverty premium" I am paying!

MartinWickham

The standing charges of utility companies are one of the more regressive costs for families genuinely managing limited expenditure; it's strange there is so little perception of their unfairness, and there seems no conviction by either government or utility regulators to notice or rectify this.

Standing charges are simply a punitively high flat-rate utility tax which most penalises families who are living the austerity: economising in the most fundamental way by reducing their consumption. Iniquitously, these standing charges subsidise lower unit rates which benefits only more prolific consumers.

Utility companies now have very few no-standing-charge (NSC) products available, and regulation a few years ago made the situation worse by banning two-tier pricing, a structure which helpfully tapered the standing charge for families wanting to economise. (Two-tier pricing was too complicated for the consumer, whimpered a lame regulator)

The charging penalty is triply concentrated in the water utilities; it is impossible in the UK to change a water supplier, and not a single water company now sees the need to offer the market any NSC, low-user products. Water is the easiest utility to reduce careless or unnecessary consumption.

There is a second moral issue: we are constantly told of the finality of fossil fuel, of diminishing electricity generating capacity, and the over-extraction of groundwater; they are all precious resources each with significant environmental and infrastructure impact, yet the standing charge structure is specifically engineered to punish minimal use in favour over-consumption.

There is no merit in the argument that standing charges are necessary to pay for infrastructure. Outside the utility companies, all other businesses distribute their infrastructure costs across their product ranges.

The UK doesn’t seem ever to exercise the sincere determination necessary to move away from the thrifty paying for the prolific, and the poor subsidising the wealthy. It’s endemic across the economy, statutes and culture of the UK. It's like that because both the wealthy and the powerful have designed and maintained it that way. Is it really ever going to change?

John-K_3

Mrs_Ryan wrote: »

And to the person who said its never acceptable to default on a debt- I defaulted on multiple debts when I got cancer very unexpectedly at 31 and was unable to work. I dont wish my situation on anyone but I assure you that the first thing on my mind when I got diagnosed was not how will I pay my credit card bill!

First of all I hope that you are now well, and that your prognosis is good, but on the point raised, That is why you need income insurance, or PPI when you take on debt.

The agreement that you sign is not that you’ll make a decent effort to pay, as long as you are well, it is that you will make all the payments on time and in full, whatever comes along.

indesisiv

MartinWickham wrote: »

The standing charges of utility companies are one of the more regressive costs for families genuinely managing limited expenditure; it's strange there is so little perception of their unfairness, and there seems no conviction by either government or utility regulators to notice or rectify this.

Standing charges are simply a punitively high flat-rate utility tax which most penalises families who are living the austerity: economising in the most fundamental way by reducing their consumption. Iniquitously, these standing charges subsidise lower unit rates which benefits only more prolific consumers.

The standing charges are something that i think needs more doing to help than any of the other things listed. I turn my gas off completely during the summer and still have to pay for it!


As for most of those things suggested in the OP. Most of the problems are with what people THINK they need for essentials.
Why pay a tv in installments? I couldn't afford one so didn't buy one for about 6 months whilst I saved for it (Also saved the price of the tv license too during that time)

I must admit it took me a couple of years to move my insurances to yearly as I basically used the 2 months of not paying council tax to fund the insurances as I moved them into my budget.

If people budgeted better 99% of the people that are having problems wouldn't. Most of the people on here have had to sort out strict budgets to pay off debts, who then carry on with that mentality for a bit and move everything to yearly payments, sadly we mostly just need the kick of the debts to get the process started!