Direct Debit for Utilities NOT cheaper

System

vet8 wrote: »

I would not invest that £100 to earn a measly little bit of interest. I would use it far more productively to pay off other debt; credit card or even my mortgage. Basically it is my money which I do not have access to.


I frequently look to switch providers and every time I do I find that I cannot save more than about £10 per year so I must be on a pretty good deal now.

Don't believe what we say; put your trust in ML:

SWITCHING NEED-TO-KNOWS

Direct debit is cheapest. Pay by monthly direct debit (not quarterly) to get a 5-10% discount.

(received in an e-mail from MSE today)

CashStrapped

What the OP needs to understand is that it is all a question of perception.

Knowing exactly what your bill is, and paying them from your account at a time convenient to you can give the impression that you are getting a better deal. This is because you are paying the bill yourself. You are more likely to make the transaction manually. You know the amount as and when it leaves your account.

This is compared to the DD system which is only an estimate of what you might use for the next year divided in to 12 monthly payments. As the DD system is an average of the year, in summer it should overpay building up a credit and in winter it will underpay (using up the built up credit). By spring it should be near a 0 balance again.

You need to think of the account with an energy company more like an energy savings account. DD money is used to credit the account but money is only taken from this account when a bill is produced.

If you request a credit back at the wrong time of year (before or during winter) the company may have to increase the DD to cover winter use.

Because the DD is automated, and a credit can build up with your supplier it can give the perception they are taking more money from you than if you were paying manually. This is not true.

The only money they deduct from your energy account is when a formal bill is produced (estimated or actual).

To improve the accuracy of the DD it is best to give meter readings as often as possible. This will help mitigate the chance of very large credits building up and/or a debt building up.

Any credit that is built up should be returned to you. This is best done in spring as it is after heavy use in winter and in time to build up credit in summer.

Remember a DD is nothing to do with what you are actually billed for. It is just a guess amount to cover what your bill is when you submit a meter reading. It is the pence per KWH that is important, that is what determines what you are being charged.

---

So the more accurate the DD (give more meter readings) and the more consistent your energy use is, the better the system works.

On top of this, the DD system results in cheaper pence per KWH rates and a small discount for paying via DD. However people do not often notice this as they use the DD as an indicator of cost and not the pence per KWH and the bill when it is produced.

backfoot

vet8 wrote: »

I would not invest that £100 to earn a measly little bit of interest. I would use it far more productively to pay off other debt; credit card or even my mortgage. Basically it is my money which I do not have access to.

I frequently look to switch providers and every time I do I find that I cannot save more than about £10 per year so I must be on a pretty good deal now.

If you have debt problems, then it is even more important to manage your energy purchases at the optimum rate. I note you didn't reply to the question about current tariff, supplier and payment method. It is the sort of detail I know from memory.

Paying more than you need on all expenses is a vicious debt cycle. Knowing your consumption history allows you to easily negotiate the correct Direct Debit. It is as much in your hands to agree this detail with your Supplier.

Sadly like most savers, I am only receiving the measly 3% but I prefer that to being in debt and living on the back of credit cards.

I didn't expect you to change your view because you have ignored all of the useful advice given by regular knowledgeable posters. Those people gave their advice willingly to counter the poor advice you and the OP are giving.

Good luck.