Drivers hit by direct debit charges
Motorists who pay their car insurance monthly by direct debit are being charged up to 40% interest, according to research by the Daily Mail.
Figures from the AA show the average annual comprehensive policy cost has increased by 11% over the past year to £778, making it even harder for cash strapped motorists to make one payment.
However, people who opt to pay their insurance premium by direct debit are facing eye-watering interest rates which could add up to £175.
According to the AA, around 13.2 million of Britain's 33 million drivers pay premiums monthly by direct debit and research for the Money Mail by comparison website Gocompare.com shows major insurers charge an APR of around 25%.
Gocompare.com spokesman Hayley Parsons says: "With such high charges, drivers could lose all the benefit of shopping around for cheaper cover."
As a result of the mounting interest costs, the AA has seen an increase in drivers stopping their direct debit midway through their annual cover, which could be more costly in the long run.
Simon Douglas, director of AA Insurance, says: "We are concerned at the number of people who appear to be deliberately stopping their regular payments to save money and driving uninsured."