The main reason for choosing to pay monthly via direct debit is that these plans are the cheapest. Monthly direct debits are the most convenient way for energy suppliers to receive payment, so they often apply a discount for these customers. In fact, in the last 12 months the cheapest direct debit deals have been an average of £170 cheaper per year than the cheapest standard credit deals, for typical usage. The discount for paying your energy bills by direct debit accounts for less than half of this saving, with most of the reduction being driven by more intense competition among suppliers than there is for households with prepayment meters.
The other benefit is that you don’t need to worry about making payments as they will be collected automatically. Many people also prefer payments being taken regularly throughout the year instead of less frequently in larger sums because it makes budgeting easier.
How do monthly payments work?
When you start with a new energy supplier, they will set your monthly direct debit based on your estimated usage throughout the full year. Most suppliers will set your monthly payment as 1/12 of your estimated annual cost. This is so that payments are flat throughout the year instead of increasing in Winter months when usage is higher.
The monthly payments will normally start out slightly higher than necessary. If after a few months you are in credit, your supplier should review your monthly payments and bring the level down. Similarly, if you are paying too little, due to increased energy usage, and your account is building up debt they will adjust the monthly payments up.
How to adjust monthly payments
In most cases suppliers should adjust your monthly direct debit to an appropriate level for you. However, it is important to check every now and then that you are not building up too much credit or debt. If the credit in your account is increasing each month (especially in winter) then it may make sense to decrease your payments.
Many energy suppliers let you manage payment settings yourself in an online account or app. Alternatively you can contact the supplier’s customer service to get your monthly payment adjusted.
Suppliers often try to keep your account in credit as a way of helping fund their business, so don't rely on them to set your monthly payment fairly.
How to change payment methods
If you have a prepay meter you will need to switch to a credit meter in order to change your payment method. You can find details on upgrading your meter here.
If you currently pay for your energy quarterly or on a credit card, then first you should check if you are on a variable plan or approaching your plan’s end date.
If you are on a variable rate or near the end of a fixed plan, you should be free to switch without exit fees. In this case the simplest way to change payment methods is to sign up for a new energy plan. Use our technology to compare energy and we’ll show you direct debit deals by default as these are the cheapest.
If you’re mid contract you may be able to switch your payment method to a monthly direct debit by contacting your supplier. If your account is in debt you may need to make a payment for the outstanding amount before you can switch to pay monthly.
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