Consumers are encouraged to budget and spend wisely over the festive season to avoid the consequences of defaulting on mandatory debit order payments.
The number of customers who default on debit orders often spikes between December and January, due to increased spending during the festive period.
Although consumers do deserve to celebrate at the end of the year and spend quality time with friends and family, they should be careful not to spend haphazardly at the expense of important financial obligations.
Here are four risks of skipping debit order payments:
- Unnecessary debt – the last thing you want at the beginning of the year is to be indebted due to poor planning. Consumers often find themselves having to take out loans or borrow from friends and family to meet financial obligations in January.
- Double debit orders – service providers will often attempt to debit double the amount due if you skip a payment due to insufficient funds in your account. For example, if a debit order for R2 000 fails during December, you could pay R4 000 in January.
- Policies lapsing – if your insurance policy debit order fails for two consecutive months, between December and January, you face the risk of your policy lapsing. This can place you at risk should an unfortunate event occur while you are not insured.
- Bad credit record – consecutive debt order bounces as well as lapsed policies as a result of non-payment could impact your credit record. This can work against you when applying for credit from financial services providers.
Consumers should take advantage of early December debit order payment offers from various service providers which allow payments to be collected as early as December 15 to help consumers avoid defaulting.
Furthermore, take into account that there are a number of unforeseen expenses and emergencies that can set you back financially in January, such as transport costs, and back to school expenses, among other factors.
Making debit order payments a priority when planning your budget for the festive season can go a long way to ensuring that you start the New Year stress free.
Ryan Prozesky is CEO of FNB Consumer Core Banking.