Is Paying by Direct Debit the best way?

murphydavid

O.K. Its almost taken for granted that you will pay by monthly direct debit and there is a force pushing us in that direction in the form of a suggestion that you will get a better tariff if you do so. However, have you or anyone you know ever not been in debit to an energy company. At the moment I am £50 in debit and am fighting to get £500 debit paid back to my elderly mother in law from SSE electric which they are very reluctant to do even though she only uses £600 a year. With 27 million households in the UK and assuming 75% of them are in debit to an energy company at at average of say £60 and they can get say 2% interest, then they are holding £1215 million pounds of our money and a massive extra £24 million pounds of your interest per year is going into their coffers. I think its time for government legislation to put an end to this. And am wondering in the mean time if I should look for a tariff where I use the fuel then pay for what I used.

martinsurrey

murphydavid wrote: »

O.K. Its almost taken for granted that you will pay by monthly direct debit and there is a force pushing us in that direction in the form of a suggestion that you will get a better tariff if you do so. However, have you or anyone you know ever not been in debit to an energy company. At the moment I am £50 in debit and am fighting to get £500 debit paid back to my elderly mother in law from SSE electric which they are very reluctant to do even though she only uses £600 a year. With 27 million households in the UK and assuming 75% of them are in debit to an energy company at at average of say £60 and they can get say 2% interest, then they are holding £1215 million pounds of our money and a massive extra £243 million pounds of your interest per year is going into their coffers. I think its time for government legislation to put an end to this. And am wondering in the mean time if I should look for a tariff where I use the fuel then pay for what I used.

Your maths is off.

2% of £1,215 is £24m

The discount for using direct debit is around £10 a year per household, so that's £270m of savings as a nation.

Doesn't seem too bad.

And I've never had a problem getting a debit balance back.

cifpower

And what makes you think they would get 2% interest? And how much would be offset against people who are in debt and people who just use and don't pay?

Bluebirdman_of_Alcathays

There are problems with your assumptions too:


https://www.ofgem.gov.uk/ofgem-publications/83041/directdebitfactsheetjan2015englishweb2-pdf


55% pay by DD - the vast majority of the rest will pay quarterly on demand, assuming 14 day payment terms, that's a large chunk of capital that we, the people, owe them.


I very much doubt 75% of customers have large positive balances on their account. They certainly didn't when I last worked for an energy co.


Unless Group Accounting has changed since I sat my exams (which sadly was some time ago so possibly! ), any interest earned from money sat on Client Account would be classed as Investment Income. Conversely, the cost of capital where customers owe firms money would go through as a loss on Investment Income. From Centrica (the largest energy co) last set of full accounts, they had 52m of II, from 14.7m customer accounts - an average of £3.50. At an average consumer bill of £1k, 0.35% can hardly be said to be material.
And to echo martin - I've never had a problem getting a balance back!

Cardew

Firstly you have got 'debit' and 'credit' mixed up; if your Mother in Law is '£500 in debit' that means she owes the company £500!


If you go back through MSE posts over the years, one of the major complaints was that the DD was set to low and customers built up a large debit balance(i.e. owed the company money) and couldn't switch companies until they cleared that debt.


Lose/lose situation comes to mind.

JJ_Egan

Ovo give 3% on credit balances .
AS i build up a DD surplus on purpose in the summer months to give a reserve tank for very cold weather i am happy enough .
Easy come end of winter to pull out any credit balance .

[Deleted User]

And some current accounts give cash back on Direct Debits to utility companies so that is a little extra money saved for the consumer.

macman

The vast majority of the more competitive discount tariffs require payment by DD. Refuse to use DD and you screen out all those tariffs.

modsandmockers

Paying by direct debit does not necessarily mean signing up to a supplier-managed 'fixed' monthly payment plan. Depending upon the supplier, it might also be possible to set up a variable direct debit authority which will only be activated upon production of a bill, and will only take the amount which is due. Obviously, the actual payment will be different every time, and the tariff prices may be slightly higher.

When you go on the comparison sites, check the different results between the 'monthly direct debit' option and the 'quarterly (or variable) direct debit' option. Ignore the 'pay on receipt of bill' option, except out of general interest.

In my opinion, a monthly payment plan is as likely to create a problem as it is likely to prevent one.

[Deleted User]

murphydavid wrote: »

O.K. Its almost taken for granted that you will pay by monthly direct debit and there is a force pushing us in that direction in the form of a suggestion that you will get a better tariff if you do so. However, have you or anyone you know ever not been in debit to an energy company. At the moment I am £50 in debit and am fighting to get £500 debit paid back to my elderly mother in law from SSE electric which they are very reluctant to do even though she only uses £600 a year. With 27 million households in the UK and assuming 75% of them are in debit to an energy company at at average of say £60 and they can get say 2% interest, then they are holding £1215 million pounds of our money and a massive extra £24 million pounds of your interest per year is going into their coffers. I think its time for government legislation to put an end to this. And am wondering in the mean time if I should look for a tariff where I use the fuel then pay for what I used.

OK , you got credit and debit mixed up but by the time you noticed that you were £50 in credit , possibly a week or two after receiving the notification, that £50 you thought your supplier was fiddling you out of, would ve been wiped out and you would be owing the supplier. Different matter though with your Mum, she needs £400 coming back, not the full amount I would ve thought. I notice that some suppliers always start off by advanced direct debits, like First Utility and Ovo etc .DD is the cheapest way for me but only on one year fixed tariff deals..eg MSE BG Collective 2016 is the current best deal.for me in S.Yorks gas is 2.65p/kwhr electric is 8.25p p/kwh compared to B.G s standard/variable 4.6p/kwh gas and 13.2 p kwr..I prefer to let the suppliers build up a big credit at this time of the year and expect to be around a zero balance March or April after the winter
Interest rates are absolutely pathetic on most accounts, 2% and upwards only on certain restrictive accounts or regular savers.. I ve got an account whats now paying me 0.2 % !! forgot to close it ..

davidgmmafan

JJ_Egan wrote: »

Ovo give 3% on credit balances .
AS i build up a DD surplus on purpose in the summer months to give a reserve tank for very cold weather i am happy enough .
Easy come end of winter to pull out any credit balance .

I've always found the OVO interest thing a bit of a gimmick, but if you keep the credit all year it might be worthwhile. Of course other suppliers may give higher discounts in terms of a cash amount.


The only other thing I would add is that there is usually a pointless news article at this time of year or just before to say 'customers in credit by x amount' which is daft as usage is going to go through the roof for most people...