Martin Lewis says there's a costly mistake many of us make on our monthly bill
Martin Lewis, founder of Money Saving Expert and MoneySavingExpert.com, has warned people about a costly mistake that many of us make when it comes to paying our bills
by Neil Shaw · ChronicleLivePersonal finance expert Martin Lewis has warned that paying for car insurance in monthly instalments by direct debit could be a costly mistake, with interest charges of up to 40% being added on top. Instead, Martin advises paying the annual bill in one lump sum or using a credit card, which could be a cheaper option even with interest payments.
Taking to X, Martin explained that monthly direct debit payments are effectively a loan, with insurance companies charging high interest rates. He said: "Monthly direct debit is a LOAN - they pay the year for you and loan you the money often at 20% - 40% APR way more than a typical credit card."
Martin expressed shock at how many people pay by monthly direct debit and urged them to avoid it if possible.
For those who can't afford to pay the annual bill upfront, Martin suggested using a 0% credit card or a standard high street card with a lower APR, saying: "If you have to, most would be far better to put it on a 0% card and repay it over the 12 months. "Or even a standard high street card with APR 20%, undercuts many big insurers who charge up to 40% APR. "The latest Money Saving Expert Newsletter revealed that Direct Line charges 23% APR, Aviva 16%, Esure 26% and Hedgehog 44%.
Martin Lewis often advises that the key to using a credit card responsibly is to ensure you pay off your bill in full every month, reports Birmingham Live.
Join our WhatsApp communities
ChronicleLive is now on WhatsApp and we want you to join our communities.
We have a number of communities to join, so you can choose which one you want to be part of and we'll send you the latest news direct to your phone. You could even join them all!
To join you need to have WhatsApp on your device. All you need to do is choose which community you want to join, click on the link and press 'join community'.
No one will be able to see who is signed up and no one can send messages except the ChronicleLive team.
We also treat our community members to special offers, promotions, and adverts from us and our partners.
If you don't like our community, you can check out any time you like. To leave our community click on the name at the top of your screen and choose 'exit group'.
If you’re curious, you can read our privacy notice.
Join the ChronicleLive Breaking News and Top Stories community
Join our Court & Crime community
Join the Things to do in Newcastle and the North East community
Join our Northumberland community
Join our County Durham community
Join our Great North Run community