Direct debit versus paying quarterly

ronald208

I have just had a letter from my gas and electric supplier increasing my direct debit. I use about £900+ of gas and electric in the winter months but it drops to about £300 in the summer. It used to work out that I was in debit in the winter but by October I was even.

Now I will be overpaying for my gas and electric usage in the winter and by October 2009 I will (if I have done my sums correctly) be owed over £200.
Given the unstable price of fuel I was wondering if it would not be better to just pay my bill every three months and not use direct debits?

Has anyone done a comparison as to paying the bill quarterly versus paying by direct debit?

I was looking at some tariffs and it looked like they were the same regardless of whether the bill was payed 3 monthly or by direct debit.

I know that most people use direct debits to even out the money they pay for fuel but would it not be better to put the amount of the direct debit in a bank account each month and pay the bill every three months, putting a suitable amount away first to cover the first big bill?

Just a thought, Ron

Cardew

I think that the majority of Energy companies give a discount for paying by DD. (I believe Ebico and UW don't)

The discount available for DD far outweighs any money you might gain from interest on money saved by quarterly billing.

The average annual bill is £1300pa - let us call it £1200 to make the sums easy.

So you pay £100 monthly on a DD.

If you bank £100 a month and take out the money every 3 months to settle your bill, you will have an average bank balance of £150 over the year.

At current interest rates you will be lucky to get 2% on such an account. So you will gain £3 a year in interest.

The discount for DD varies but are in the range of 3% to 9% off of the whole bill. So that will be £36 to £108 a year.

ronald208

I have just found out I can pay my fuel bill with a credit card, I am with Eon, so I would get 1200p cashback per year with my cashback credit card. My last discount for paying by direct debit was £14 in Oct, in July it was £45 so it looks like Eon are reducing the direct debit discount. I am due a bill in the next few days so I will wait and see what discount I get this time.

It will probably be cut my nose off to spite my face time but I am annoyed with the direct debit increase and since I can afford/manage to pay my bill quarterly I will do that rather give them a £200 loan by October.

A great pity my high interest savings account has just been cut to just under 2% and the last interest cut has still to be done.

So off to check the comparison sites.

Ron

1carminestocky

Best way to have the ability to use DDs like standing orders (but, crucially, get the DD discount) is to switch 4 times per year through one of the various 100% cashback sites.

£300 per year is possible this way but it alos has the additional advantage of YOU choosing your DD amount when you join the new energy supplier! I try and pay exactly what I will be using in the 3 months I will be with them for. That way, I haven't got a debit balance to pay when I switch but IMO even more importantly I haven't given the rip-off merchants an interest free loan whilst I have been with them. Of course, because I am with the company for 3 months max it also doesn't give them the opportunity to &^%$ about with my DD amount. It's a winner whichever way you look at it.

Magentasue

ronald208 wrote: »

It used to work out that I was in debit in the winter but by October I was even.

I think that energy companies are making their calculations based on being at zero in the spring. Of course, this works in their favour because you build up a credit and this is eroded by winter use. Your way - building up a debt - doesn't work in their favour. I think the suppliers have a point - they are minimising the risk of customers building up debts they can't pay.

libra10

We are with Ebico and pay quarterly on receipt of bill.

There seem to be so many horror stories of DDs being increased to almost extortionate rates, with customers spending ages on the phone to call centres in attempts to get correct billing resolved.

Although you don't receive the DD discounts some energy companies offer, you don't have the same hassle. I prefer the old-fashioned way of bill paying. At least, I know where I stand.

ronald208

Another sneaky ploy to get you in debit so Eon can up your direct debit.

Direct debit day 14th of month, bill day 12th of month, that way your latest direct debit isn't put towards your bill so I am £98 more in debit than if my bill was calculated 2 days later, so Eon upped my direct debit again, that's twice in 2 months, was £65 in Dec then £98 for one month, now £114 and they haven't collected any direct debit since 14th Dec but they will collect it two days after the bill.
£588 a year more for fuel than last year.
At least I will get 588 more Tesco points which is probably more than I would get in interest if the money was in a bank account:rotfl:

I did some research and it is cheaper to pay by direct debit, at least for me anyway.

Ron