Energy payment methods: direct debit, cash or prepayment?
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Take back control over your energy bills! Call us and let our experts guide you on how to make big savings.
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There are quite a few energy payment methods to choose from. Some customers opt to pay their bill every month, some pay quarterly and some pay for the electricity they use in advance. Different energy payment methods come with different pros and cons. Finding the right energy payment method for your household can make it easier to stay on top of your household outgoings and save on your energy bills.
Last updated: March 2021
With so many energy payment methods to choose from, finding the right option for your household isnโt always easy. Here, we take a closer look at the different options available and what each would mean for you.
Different energy payment methods
Before you can choose the right energy payment methods for your household, itโs a good idea to find out a little more about the different options available. Most suppliers will offer a choice of payment options, although not all suppliers will offer every option.
Monthly direct debit
One of the easiest energy payment methods is a monthly direct debit. In many cases, this is the cheapest way to pay. This is because energy companies often give customers who pay by monthly direct debit preferential tariffs and special offers.
If you opt for a monthly direct debit, youโll pay the same amount every month. The amount you pay will be determined by your supplier. Theyโll estimate how much energy you use in a year and divide it by 12. This means youโll be paying for more energy than you use in the summer and less in the winter. Over the course of the year, the amount you pay should even out and cover your total energy consumption.
If you opt for this type of energy payment, youโll need to keep a close eye on your bills to make sure youโre not under, or over, paying. Take regular meter readings and send these readings to your supplier so they can keep track of how much energy youโre using.
This energy payment method means you always know how much youโre going to pay for your gas and electricity. This can make it easier to budget and so is a good option for those who like to keep a close watch on their monthly outgoings. Customers choosing to pay by monthly direct debit need to ensure thereโs always enough money in their account to cover their bill.
Pros and cons of choosing monthly direct debit:
- You know exactly how much your energy bill will be
- Gives you access to the most competitive tariffs
- Payment is taken automatically, reducing your monthly admin
- Itโs possible to fall into debt to your energy company if your usage goes up during the year
- You need to take regular meter readings to keep your direct debits accurate
- You need to make sure thereโs enough in your account to cover your energy bill
Monthly variable direct debit
With a monthly variable direct debit, money is still credited from your account automatically every month. However, unlike a standard monthly payment plan, the amount you pay will vary depending on your usage. This means youโre likely to pay less in the summer and more in the winter when your lights and heating are on more of the time.
If you choose this method of energy payment, youโll have to submit meter readings every month so your energy provider knows exactly what to charge you. If you donโt have a smart meter, this can be a little laborious. If you go for this option, itโs important to remember that your energy bill will be a lot higher in the winter. This means you may need to save up to cover the extra cost and stay on top of your bills.
Pros and cons of monthly variable direct debit:
- You only pay for the energy you use
- In summer, your bills will be cheaper
- Payment will be taken automatically from your bank so you donโt need to worry about manually paying your bill.
- Customers without smart meters have to take monthly meter readings
- Winter bills can be considerably higher, making it hard to budget
- You wonโt know exactly how much you need to pay until your energy bill arrives
Quarterly direct debit
If you choose to pay for your energy quarterly by direct debit, youโll get a bill every three months. As they cover a longer period, quarterly bills are a lot higher than monthly bills, so you may get a shock when it drops through your door.
Some energy companies still offer discounts to customers paying by quarterly direct debit. However, the discounts available are unlikely to be as big as those for customers paying monthly.
One of the main benefits of paying quarterly is that it reduces the number of bills you have to deal with every year. This makes it a good option for customers who want to keep admin to a minimum.
Pros and cons of quarterly direct debit:
- Fewer bills to pay
- You only need to take meter readings four times a year
- Access to discounts and special tariffs
- Bills will be significantly higher, this can make it harder to budget
- Discounts wonโt be as big as monthly direct debit customers
Paying your bill upon receipt
Customers who donโt want money taken from their account automatically can opt to pay by their bill upon receipt. This means, when your bill drops through your door, youโll need to manually pay your supplier by phone, bank transfer or via their app.
Paying upon receipt is a good option for house sharers as it allows money to be collected from each resident before the bill is paid. Itโs also a good choice for customers who canโt guarantee how much money theyโll have in their account every month.
Pros and cons of paying upon receipt:
- Allows you to organise your finances before paying
- Money isnโt taken automatically from your account
- Paying upon receipt requires extra admin
- You wonโt have access to the most competitive deals
- It can be easy to forget to pay your bill and fall into debt to your energy company
Prepayment meters
Customers with a prepayment meter pay for their energy before they use it. This is a good option for people who want to stay on top of their finances.
However, itโs generally the most expensive method of energy payment. If you have this type of meter, you wonโt pay every month. Instead, youโll top up your credit as and when you need it.
You can top up your meter by putting money on your top-up card at the Post Office, finding a shop with a PayPoint or PayZone machine or by going online to your supplierโs website. Some energy suppliers also have apps that allow you to top up quickly and easily.
Pros and cons of a prepayment meter:
- Allows you to stay on top of your finances
- You know exactly how much youโre spending on energy
- You can keep track of your energy usage
- Generally the most expensive way of paying for energy
- Topping up can be a hassle
- No discounts or special offers available
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What are the different charges on your fuel bill?
When you look at your energy bill, youโll notice there are a few different charges listed. These add up to give the total amount you owe your energy company. Most customers will pay a set rate for every kWh of energy they use. This is known as a unit price. This amount will go up and down depending on the level of your energy consumption.
The second amount most customers will see on their bill is the standing charge. This is a fixed fee charged by energy suppliers for connecting customers to the grid and providing them with energy. This value should be the same on every bill you get.
Different ways to pay your energy bill
There are a number of different ways to pay your energy bill. Choosing the right energy payment methods will help you manage your finances.
- Pay by Direct Debit – Direct Debit payments are taken automatically from your account. Once a Direct Debit is set up, you donโt need to do anything except ensure there are sufficient funds in your account.
- Pay at the bank – If you want to pay your bill at the bank, simply fill in the Giro form at the bottom of the bill and take it to your local branch. You can pay either with cash or by cheque. Some banks will charge for taking payment.
- Pay by post – You can pay your energy bill by post by sending a cheque to your supplier. Be aware that payment by post often takes up to a week, so itโs not a good option if youโre in a rush.
- Pay at the Post Office – Paying at the Post Office is the same process as paying at the bank. Payments should take around three days to be processed
- Cash payment – The easiest way to pay with cash is to find your local Payzone. These are located in shops all over the country.
- Pay with a gas or electricity payment card – Payment cards are a good option for people who donโt want a Direct Debit taken from their account automatically. If you have a payment card, you can make payments to your energy company whenever you can afford to, even if you havenโt had your next bill through yet. To pay on a payment card, youโll need to go to a Post Office, Payzone or PayPoint.
To read more on this topic, check out our other guides:
- Switch energy suppliers
- Compare energy plans
- Energy-efficient appliances
- Student gas and electricity
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Updated on 31 Mar, 2021
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