There are many different truths and myths about capitalism. The outcome, however, is usually the rich get richer and the poor get poorer. Indeed, when you look at the national statistics, you will see the highest levels of poverty for decades. There’s also a widening gulf between the richest and, as the Occupy movement would have it described, the remaining 99%. All of which means there are some very unkind ways in which the poor are penalized for being poor. As an example, let’s look at the question of payment plans. When you first look at the quotes that come back from the insurance companies, one of the first decisions will be how to pay what’s being asked. The first reaction is usually that it’s better to spread out the payments month by month. Adding another installment payment fits into the usual pattern of household expenditure and avoids stressing the budget. Except this usually means you are opting for the more expensive system.

This is treated as asking the insurance company for credit. It is, after all, entering into a contract with you for six or twelve months of coverage. Instead of you paying for this in full, you are spreading out the payments. For this privilege, you pay a fee. If it was expressed as a loan, the additional sum would be called interest. In one sense, this is a penalty for those who literally cannot afford a lump sum. If it was always a trivial amount, we could smile weakly and accept it. The reality is that, over six months on a standard policy, the difference can be more than $100. Put this the other way round and ask about about discounts. You will usually discover how much you can save if you have enough to pay the premium in full. Indeed, if you have savings, it’s always better to pay as a lump sum. It also avoids any problems in you forgetting to make any of the monthly payments.

You should also look out for the hidden fees. The majority of insurers list the premium rate as a monthly sum. This means they neglect to tell you about the fees they charge depending on how you make the payments. There can be big differences depending on whether you pay by electronic wire transfers or online or by the traditional check (which many businesses are now trying to discourage). Some add an administrative fee for handling all monthly payments. There have been problems with this practice in some states and their Insurance Commissioners have issued regulations capping the fees the car insurance companies can charge.

The moral of this is clear. If you are fortunate enough to have savings, always get the car insurance quotes including the discount and pay the full amount. For the majority who are struggling financially, do the calculation. Find out how much you will save if you pay in full and then see whether you can borrow this amount. Obviously, a payday loan will cost you a fortune — if that’s your only option, pay monthly. But if you can borrow more cheaply, do the math. Otherwise, try to save a little each month so that, when he renewal comes around next year, you can pay in full.