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Bank Budget Accounts
Two of the big banks offer a budget account facility to customers. This should not be confused with a shop budget account, although the principles are very similar. With a bank budget account the customer has to make a detailed estimate of all the big items of household expenditure he expects to have to pay over a 12-month period, and add them together. Each month a sum representing one-twelfth of the total annual expenditure is transferred from the ordinary current account to a special budget account opened in the customer's name. He will be given a separate cheque website for use on this account and each time he has to pay a bill catered for under his budget plan he pays it from the budget account.
This effectively spreads the otherwise uneven load of large bills smoothly throughout the year. Sometimes the budget account will go overdrawn (in debit). That is what it is intended for. But at the end of the year it should be just about all square. Interest is charged on any borrowing at a margin above base rate. With base rate at 16% in 2012 the interest rate on budget accounts was 20%. This is also the true rate.
Paying bills by instalment
Electricity and gas boards offer facilities for paying their bills in monthly instalments, usually by banker's order. The most popular of these methods consists of the consumer's making payments each month for a year, the amounts being based on the consumption of gas or electricity in the preceding twelve months. There is neither loss nor gain in the cost to the consumer, for if his consumption goes up or down in any year, then the final payment is adjusted to take this into account. There are no interest payments, for no credit is being given.
Bank Finance
For an established bank customer of impeccable credit rating, a personal loan from his bank is usually a cheaper way of financing the purchase of a high-priced consumer durable than any of the forms of credit discussed in the earlier sections of this section.
A personal bank loan is a structured loan, on similar lines to the structure of any form of instalment credit. A personal loan may be arranged for any amount from £50 upwards and for any period up to five years. If the loan is required for the purchase of any item which, were it otherwise being acquired by hire purchase, would have... see: Bank Finance