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Change Your Payment Arrangements
Although we think it's rather unfair, those people who pay by Direct Debit often find massive savings compared to those who simply pay by cash, or pay when the bill arrives.
On the other hand, if you enjoy the savings of Direct Debit already, but you often miss the bill because the bank balance is too low, you could be facing charges that are much more expensive than any saving.
Changing the way you pay, the frequency you pay, and the method of paying can all make big differences.
Using Direct Debit to pay your energy bills can save you time and money. We assess the advantages and disadvantages of using this payment method…
With energy prices continuing to rise, we will all be looking to find ways to save money on energy bills . But before you start rationing the central heating or introducing the “one hot bath a week” rule, there is an easier way to save – switching to Direct Debit.
Many people are already making the most of the discounts that paying by Direct Debit offers but if you haven't already signed up, you're not alone. Common fears about Direct Debit payments include being overcharged and not getting a refund if something goes wrong.
However, many of these issues can be overcome. In this article we will weigh up the pros and cons of paying for your gas and electricity by Direct Debit, as well as revealing the top tips for making Direct Debit work for you.
Direct Debit payments are taken directly from your bank account by your supplier. The payments come out on a specified date, this may be:
Companies claim that Direct Debit payments are cheaper to process than other payment methods like cash and cheques, but the main advantage for the energy supplier is that their payment is guaranteed. Because of this, they are keen to offer discounts to customers who pay by Direct Debit.
According to gas and electricity watchdog, Energywatch:
“If you are paying by cheque every quarter you could save on average £150 a year by switching to Direct Debit and possibly more if you switch to an online account.”
The main perk is the fact that using Direct Debit is almost always the cheapest way to pay your bills and can save you plenty of cash, but there are other advantages too:
Furthermore, Direct Debit payments are protected by the Direct Debit Scheme which means:
Making Direct Debit payments that are higher than is necessary to cover your energy usage will result in overpayments to your energy supplier. You won't receive interest on the money you overpay but you are entitled to a refund.
In some cases, you may not want a credit balance to be refunded, instead preferring to carry it forward onto future bills. Indeed, some payment plans are designed to carry a credit balance on your account over the year (for example monthly payment plans), so you pay the same amount each month in order to spread the energy costs over the year, building up credits for the colder months.
Some suppliers will automatically refund you if they find that your overpayment totals more than a certain amount. If you pay by Direct Debit, this is made directly into your bank account.
However, some suppliers will not make refunds automatically or will only refund larger amounts automatically. For this reason it is important that you read your bills carefully and ensure you know how much you are paying and how close this is to your actual usage. If you deserve and want a refund, be sure to request one.
The following table shows the different energy suppliers' refund policies:
| Supplier | Refund repayment rules | Frequency of payment reviews |
| EDF Energy (www.edfenergy.com) | Credit of more than £150 is refunded automatically. | Every six months |
| npower ( www.npower.com ) | Overpayments of more than £25 will be refunded to UK customers automatically, but if they are less than then you must contact their customer service centre. | Automatic refunds above £25. |
| Scottish Power ( www.scottishpower.com ) | Customers must contact SP to request a refund of overpayments. | Every three months |
| E.ON ( www.eonenergy.com ) | Any credit in excess of one month's payment will be refunded. | Any credit in excess of one month's payment will be refunded. |
| British Gas ( www.britishgas.co.uk ) | Customers with more than £80 in credit on their account will be contacted and offered a refund; those with less than that have to get in touch with the company independently. | Every three months |
With recent fuel price rises, many people have found that because their Direct Debit payments are fixed, they have not been paying enough to cover their actual energy consumption.
This means if your supplier reviews your payments and finds they are insufficient, you will have to make up the shortfall. Your supplier must notify you of the new increased monthly payment amount and the date from which it will apply. If you have built up a shortfall over a period of time, the supplier may suggest a further increased monthly payment to pay off the amount owed over an agreed period.
It is important you ensure your payments reflect your usage as much as possible as if you want to switch energy suppliers but find you owe a large amount of money, it will restrict you.
You can reduce the possibility of being overcharged or undercharged by managing your account online and taking your own meter readings. This will help ensure your bills are accurate, showing clearly how your Direct Debit payments relate to the amount of energy you are using.
Generally, online tariffs will also provide additional discounts as taking your own meter readings and entering them online means you are making the correct payments to cover your usage.
You should never get disconnected – especially if firms are aware that you are an older customer or have children in the house.
If you miss a payment or are unable to make a payment, contact your energy provider as soon as possible. Government regulations say customers should not be disconnected from services if a payment arrangement is made and payments are submitted on time – even if they are small.
Many energy suppliers offer special payment plans to help those in debt.
The Code of Practice for Accurate Bills has been developed by the Energy Retail Association (ERA, www.energy-retail.org.uk ) and is supported by British Gas, EDF, npower, E.ON and Scottish Power. The code regulates how energy suppliers charge and bill customers and sets out what customers can expect from their energy supplier, including:
In addition, the ERA has introduced an Energy Supply Ombudsman that will adjudicate disputed claims for compensation which have not been resolved to the customer's satisfaction through the supplier's complaint system.
Paying by Direct Debit can shave a substantial amount off your energy bills and if you manage your account online as well, you could save plenty of cash. Follow these three top tips and start taking advantage of Direct Debit discounts today: