Readers' lives

Direct debits ... charges on pension plans ... BT Chargecards. Each week we answer your letters on everyday financial concerns and explain how to make more informed choices
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Are direct debits such a good thing for the man in the street? They seem to favour banks and businesses more. FH, Newark

Banks and many businesses are very keen on direct debits because they provide a cheap and efficient payment system.

With a direct debit you authorise a business (for example, an insurance company) or other body (for example, your local authority) to take money from your bank account on a regular basis. The amount is decided by the organisation receiving the money and does not need your specific authority.

This contrasts with standing orders, where you decide the regular amount to be paid. This can be inconvenient where you expect the amount paid to change. If, for example, you pay your mortgage by standing order, you have to fill out a new order each time the mortgage payment changes.

As well as avoiding the hassle of writing cheques or changing standing orders, many businesses - such as the electricity companies - will give discounts to customers who pay by direct debit.

But convenience has its catches. Many people don't like the idea of someone else having direct access to the money in their bank account. There is no doubt that mistakes are made and, if you use direct debits, it is important to check your bank statements carefully.

There are some safeguards. You have to be given 14 days' notice of any change in the date of the debit or the amount debited. So with regular bills you should get advance warning of any alterations. This gives you time to tell your bank not to pay if you think the amount (or timing) is wrong.

There is also a money-back guarantee if any errors are made. You should simply have to tell the bank that a mistake has been made to ensure your account is re-credited (along with any consequential bank charges you may have incurred). Banks should not take sides between you and the organisation expecting payment. Instead, they should re-credit your account if asked and then sort things out.

On balance, the benefits of using direct debits probably outweigh the risk that things could go wrong. In any case, they are increasingly becoming the norm. The days of the cheque book and the standing order could be numbered.

Where can I find past performance records of personal pensions that include the effects of commission and charges?

RW, Cirencester.

Try Money Management - a monthly magazine available from many newsagents that produces surveys showing past performance after commission and charges. The surveys are published twice a year, usually in March and October. The magazine costs pounds 4.50, back issues cost pounds 7.50, and you can get photocopies of specific articles for pounds 5. Telephone 0171-896 2574 for details.

But as with all past performance figures, these will not tell you which will be the best pension for the future.

Nowadays, when you buy a personal pension, you should be given a projection showing how future performance may be affected by the company's current charges (these projections are also in Money Management's surveys). But these are standardised projections - all companies are required to use the same investment growth rate. The lowest chargers may not turn out to be the best if their investment performance proves poor. Of course you will not know at the outset how future investment returns will stack up.

Another problem is that your actual returns will also depend on what happens to charges in the future; these could change too.

What is the cost of BT Chargecard calls? Many parents give them to students to allow them to phone home, but I have an idea that they are expensive. Would it be cheaper to use your Chargecard to ring home and then get your parents to ring you back? JP, South Glamorgan

BT Chargecards allow you to use phones outside your home while having the cost of calls added to your own phone bill. Parents can get a card which allows sons and daughters calls home only, removing the worry that they could run up big bills elsewhere.

You can ask BT for a list setting out the cost of Chargecard calls. As a rule they cost twice as much as calls made from your home phone. However, this still works out about 5 per cent cheaper than calls made from public payphones. In view of the extra cost, it will often be cheaper for parents to ring back, especially for long calls.

Write to Steve Lodge, Personal Finance Editor, Readers' Lives, Independent on Sunday, One Canada Square, Canary Wharf, London E14 5DL, and include a telephone number. Do not enclose SAEs or documents that you want returned. We cannot give personal replies and cannot guarantee to answer every letter in Readers' Lives. We accept no legal responsibility for advice.

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