24 November 2017 : 
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Saving money on energy bills

6. Energy payment options – which one is best for you?

Surprisingly, just changing your payment plan can save you a substantial amount of money so this is definitely a compareandsave hotspot.

There are a number of different things to consider when arranging how to pay for your energy:

Do you have a bank account?

YES

If you do have a bank account, it opens up the possibility of paying by direct debit and gives you two advantages:

1. Energy companies offer a discount if you pay by Direct Debit.

The amount of discount varies, as does when you qualify for it. Some companies offer a discount for paying this way in general. Other stipulate that you only get the discount if you pay monthly and some say you have to pay by Direct Debit for a year to then qualify for the discount.

NOTE: Be sure to familiarise yourself with the ‘Direct Debit discount’ section of the tariff’s terms and conditions before you make your choice.

2. No more late payments

You won’t have to worry about remembering to go to the post office or about sending the payment to the company. This is good if you forget to pay your bills and as long as you remember to have the money in your account when it is due to be collected by the company.

Having a bank account also allows you to send off a cheque directly to the energy company to pay for your bill.

NO

If you don’t have a bank account, then there are other payment options. You can pay by cash by taking your bill or pre-payment key/card to:

• a Post Office

• a PayPoint

• a bank (who will probably charge you a fee)

Alternatively, you can send a postal order off to your energy company for the required amount.

NOTE: You may still be able to pay by Direct Debit if you don’t have a bank account. Many banks and energy companies can provide you will a bill payment account which you can pay money into through a range of outlets. This is then collected by monthly Direct Debit.

However:

• These accounts do not let you go overdrawn

• They sometimes come with administration fees

• They may charge you penalty fees if you don’t have enough money in your account to pay the direct debit

When do you want to pay?

Another thing to consider is when you want to pay for your energy. You can choose to pay yearly, quarterly, monthly or by pre-payment.

1. Yearly – One bill a year, after 12 months of usage

Paying yearly can be another solution if you don’t want to worry about your bills for the year and/or don’t have a bank account. However, we at compareandsave would say that this is probably the worst way of managing your energy accounts. If you receive a yearly bill, you will have to pay out a large sum of money in one go. This sum of money is likely to be in the hundreds of pounds and with prices changes could catch you off your guard as you won’t be able to estimate how much your bill is likely to cost.

2. Quarterly – A bill to pay every 3 months

Paying quarterly is probably the more popular method of paying. However, this does not mean that it is the cheapest. Generally speaking, energy companies do not offer a discount if you pay quarterly.

Paying for your energy every three months does mean, however, that you don’t end up with a large bill at the end of the year. Instead, it is broken into four more manageable chunks.

Another thing to consider about paying for your bills this way is that the winter quarters are going to be considerably more expensive than summer ones because your usage will likely increase in colder months. This might work well for you if you have other things to save for in summer months.

3. Monthly – A set amount to be paid each month by direct debit, standing order as part of a flexible payment/budget scheme.

If you choose to pay monthly there are a number of options available to you in terms of how you pay and the amount you pay.

Fixed payment budget schemes

These involve your energy company estimating your annual usage and then dividing the cost of this into 12 monthly installments. You then pay this monthly by direct debit.

Depending on the energy company, you make you payments by post or at Post Offices, banks or other outlets.

At the end of the 12 months, you may either owe money to the company or be in credit with them. This can either be carried over to the next year or paid off. If you owe a large amount you will probably be asked to pay this off.

However, this is unlikely to happen because you get a bill calculated every three months. If the energy company can see that you are using more than they estimated you would, they will up your monthly repayments to cover the extra usage so that you aren’t left with a larger sum to pay at the end of the year.

This scheme is advantageous because it allows you to spread the cost of your energy throughout the year. This means that instead of paying out a large amount of money in winter and barely anything in the summer, you pay equal amounts throughout the year.

Example of budget scheme part of electricity bill

- based on 3 people sharing a 3 bedroom semi-detached house with economy

  seven (Adapted from a real Atlantic Electric and Gas bill)


   

a. TOTAL FROM PREVIOUS BILL -£12.82 = the amount you have carried over from the last bill. The minus sign means that this is money that you have in credit on the account

b. Payment received 01 September 2007 -£20.00 = the monthly installment amount and when it was made.

c. TOTAL FOR YOUR ACCOUNT -£4.07 = your current account status. The minus sign means that the account has money sitting in it and is therefore in credit.

TIP: If you are on a budget payment scheme you will get quarterly bills. The energy company will estimate your usage unless you have provided them with one or they have sent out a meter reader to take one for them.

Check your bill to see if there is an (E) next to your reading. If there is take the reading yourself and inform your energy company of it. They will then adjust your bill accordingly. This will help them to better manage your monthly payments. If they have over-estimated your usage your repayments will go up unnecessarily.

4. Whenever you like – You pay what you like when you like

There are some schemes that allow you total flexibility in what you pay and when you pay it.

Flexible payments scheme

The energy company may offer a scheme where you can pay any amount at any time. This would involve having a credit meter. This can be a good way of paying for your energy if you have a variable income. Make sure you carefully check the terms of the scheme especially how your payments are worked out and what happens if you pay too much or not enough.

Pre-payment

Pre-payment schemes involve having a pre-payment meter and a special key or card to go into the meter. You take the card or key to a Post Office or PayPoint and pay them to ‘top it up’ to the desired amount based on how much you choose to pay. You then put the card/key into the meter and it will allow you the relevant amount in energy.

The energy company will send you a bill once a year to show you how much energy you have used and how much you have paid for it.

If you are in a lot of debt to the energy company, they will offer you a pre-payment meter instead of cutting you off. They will program your arrears into the meter so that every time you put credit into it some of the money goes towards paying off the debt.

The cost per unit of energy is the most expensive if you have a pre-payment meter. Also, if you forget to top up the meter with credit your energy will be cut off. To try to prevent this, the meter allows you to go into around £5 worth of ‘emergency credit’ so that you still have energy to see you through until you can get to the shop to top up.

There is a popular misconception that the only way to budget energy bills is to have a pre-payment meter and ‘pay as you go’. This is great if it is the last resort, and you know that the only way you will

pay for your energy is if the house is dark and cold. However, if you go onto a budget payment scheme, you will probably halve your monthly energy costs and still be budgeting your money. If you are worried about spending your energy money before the end of the month, talk to your energy company and see if they will allow you to pay in weekly or fortnightly installments. They may well be able to help you.

NOTE: If you do have a pre-payment meter, make sure you know the opening times and locations of other top up points near you in case your usual one is closed.

DID YOU KNOW…?

• If your energy company hasn’t billed you for your energy in over a year, they cannot claim back money dating back past one year.

• You can buy energy stamps to save up for your bill. You can get these from Post Offices and other outlets.
 
 

Look at your gas and/or electricity bill and note down how you currently pay for your bills.


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