For years I had been paying my insurance by monthly payments. There was a time when that was all I could afford and it was convenient. I have continued to use the offered pay monthly schemes simply because it was easy and convenient.
This year when my car insurance renewal came through I did allow it to renew and it automatically selected the monthly payments option. A few days after renewal I got a credit agreement form through the post. Rather than just signing it and returning it, as I was asked to do, I actually studied the small print.
I was shocked to discover that for the convenience of paying by monthly installments I was being charged a whopping 39% APR. Yes, 39%
I can only go from memory on this but I feel sure that years ago when these monthly payments arrangements were offered they charged only a nominal fee for the privilege. It seems now that the companies offering monthly payments are doing so to add a whole layer of extra profits on top of the insurance.
I phoned the company in question and paid the full annual cost and avoided these additional costs. If you can afford to do so, I would suggest you do the same. If you cannot afford to pay from your current account this is a case where it probably makes good sense to use a credit card to pay the annual fee since even the horrendous costs of using credit cards don’t compare with 39% APR charged in my case.
I will, in future, pay all my insurances in a lump sum to avoid these charges and the savings will be significant.