When it comes to paying your energy bill there are a lot of different options. Find out how the different payment methods work, so that you can set up your bills in a way that suits you.
What payment methods are available?
If you have a credit meter the main ways to pay your energy bill are:
- Direct debit payments
- Payment on receipt of bill
If you have a prepayment meter you will need to add credit in advance by:
- Visting a Post Office or Payzone
Some prepay suppliers also let you top up online or in an app
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What’s the best energy payment method?
For most households it’s easiest to pay for your energy by monthly direct debit, and some suppliers offer discounts if you do. That’s because the money leaves your account automatically so you can never forget to pay. You just need to make sure there’s always enough money in your account to cover the payment.
If you want to keep a closer eye on your bills, and exactly how much you’re spending each month then it may make sense to pay on receipt of bill. The downside is that you need to remember to make the payment every month, and you might miss out on direct debit discounts.
Prepayment tariffs are normally much more expensive than credit tariffs, so if you have a prepayment meter ask your supplier to switch to a credit meter if possible.
How do the different payment methods work?
Monthly or quarterly direct debit
Direct debits give your supplier permission to take money from your bank account at regular intervals. Your energy supplier sets up and manages the direct debit, and they can increase or decrease the amount taken based on how much energy you are using. Some suppliers let you set the amount of your direct debit yourself in your online account. Payments are normally taken monthly but some suppliers also offer the option to pay quarterly direct debits.
Benefits of paying by direct debit:
- These are often the cheapest way to pay as energy suppliers offer direct debit discounts
- You can save time on admin as payments are processed automatically
- You’re protected by the Direct Debit Guarantee, and you can cancel a direct debit with your bank if you are concerned about inaccurate billing
Cons of paying by direct debit:
- Payments are taken automatically so it’s important to keep track of how much will be taken and when
- Sometimes suppliers will charge more than needed, causing your account to build up credit
- If you do not have enough money in your account to pay a direct debit you may face overdraft charges from your bank
Fixed or variable direct debits
Normally suppliers use monthly fixed direct debits, so they estimate how much energy you will use over a year and charge you one twelfth of this amount each month. The supplier can still increase the direct debit if they’ve underestimated your usage, but they should give you 10 days warning if they are increasing your payments.
With a variable direct debit, you pay for the energy that you’ve used within the month instead of flattening your payments throughout the year. It’s important to submit a meter reading each month so the supplier can bill accurately.
Normally fixed direct debits are easier to manage because you can budget the same amount to energy each month. However, if you earn more money in winter or are concerned about your energy account building up unnecessary credit then a variable direct debit might be the payment method for you.
Benefits of variable vs fixed direct debits:
- You can ensure all bills are based on actual usage, and prevent building up unnecessary credit in your energy account
Cons of paying by variable direct debit:
- It can be harder to budget as your bills will vary each month
- Bills will be higher in winter when you are using more energy
Payment on receipt of bill
This is the most traditional form of payment. Your energy supplier sends you a bill for the energy you have used, and you pay it. You can arrange for bills to be sent monthly or quarterly and payment can then be made in a number of ways, for example:
- by bank transfer
- with a credit or debit card, online or over the phone
- sending a cheque in the post
If you pay on receipt, your energy bill should include details of how to pay, such as the account details for a bank transfer, or the number to call to pay over the phone.
Benefits of paying on receipt:
- No money can be taken until you’ve processed the bill, so if you want to challenge the amount or pay on a particular day, you can
- If you’re paying on receipt you can ensure all bills are based on actual not estimated usage to prevent building up unnecessary energy credit
Cons of paying on receipt:
- You need to commit the time to ensure all bills are received and to organise payment
- Missing a bill can damage your credit score, or lead to a larger bill later on
- You might miss out on cheaper deals that require you to pay by direct debit
If you pay on receipt, some suppliers will offer a discount for paying quickly. For example, you might get a 5% discount if you pay within 10 days of receiving your energy bill. The amount and timing of discounts will vary by supplier, so check your T&Cs or ask the supplier if prompt pay discounts are available.
Note that, even if you pay quickly, prompt pay discounts will normally be smaller than the savings available by switching to direct debit payments.
Paying online or through an app
To view and pay your bills online, you’ll need to set up an account with your energy supplier. Most suppliers will have details of how to do this on their website. If you’re with one of the biggest suppliers click the links below to get started with your online account:
Visiting a Post Office or Payzone
The majority of prepay meters will have a card or key attached that needs to be topped up in person. To top up take this card out of your meter and take it to the Post Office, or a shop with a Payzone machine.
You can find Payzone machines near you using their store locator. There may be a self-serve machine, or you may need to go to the counter and ask to top up.
How can you switch payment methods?
If you have a credit meter and are not tied into a fixed contract, then the easiest way to switch payment methods is to sign up to a new energy deal. Most comparison sites will set up a direct debit automatically when you switch supplier.
If you’re happy with your current supplier, or locked into a tariff with exit fees, then you’ll need to contact your supplier to switch payment methods. Be aware that if you are switching form direct debit to paying on receipt, the supplier may increase your costs.
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