Paying by direct debit to make you money.

[Deleted User]

casjen said:

There's no risk whatsoever in doing whole month DD. Calculate your next 12 months cost, ring  fence that amount each month as you add to it and then pay the bill out of it. Childs play. If you are stupid enough to spend  it then more fool you. Even a 5 year old could cope. People really don't have a clue these days.

My income is roughly the same every month. Why wouldn’t I want my outgoings to stay roughly similar to match that, without the pointless need for “ring fencing”?

And are you really suggesting that if an unexpected event happened, like the car that someone needed to get to work broke down, that only a “stupid 5 year old” might spend this cash reserve on something like that?

Feel free to ‘stick it to the man’ if you like, but don’t try and claim that it’s for any other reason than that, and don’t try to abuse people who manage their life in another way.

The_Green_Hornet

Variable direct debit is good for households who have a fair amount of disposable income and can pay out the higher amounts during the winter without having to put the money aside beforehand.

If not, I would stick to fixed and spread it evenly throughout the year.

EssexHebridean

TransmitThis said:

I'm with you DU05ZLE, and other's who recommend this option.

I'm going to see if Shell do the Variable full monthly bill payment DD (probably do) as it will be a much better option for me.

I am after all quite capable of managing my own finances.

As far as I can see people who get into debt, are people who get into debt

Just because their Energy supplier is making sure they get their payments, that person would most likely still have debt issues with all other bills in their life, Transport, water CTax, Rent / Mortgage, Credit Card etc.

For most people who understand what a kWh is and that using more will cost more - then paying in full each month seems like a great idea. (I honestly didn't even know it was an option, never looked into it)

For people who have difficulty managing finances, sure do whatever helps, but I don't think having hundreds of pounds tied up for future bills is a good idea, simply because you may have more pressing needs ie to furnish a immediate debt that has high interest ( You are after all a person who had difficulty managing finances.)

You do understand that, if you are budgeting correctly for making payments in the way being discussed, you SHOULD be in a position where at certain times of the year, you already WILL have hundreds of pounds tied up (in the savings account where you are keeping it ready to pay the bills when needed) in order to ensure that you can cover those higher winter bills when they turn up?  You also seem to be confusing people who may not have the skills needed for managing a highly variable month-on-month budget with those who routinely use high-interest forms of credit - which is far from always being the case. 

"People who get into debt" can be all sorts of people - for example, and from examples we've seen on the forum: 
- People who have been let down by a builder who has done a shoddy job, leaving their house pretty much falling down around them, and requiring an urgent and costly fix. The building work was budgeted for - the completely unexpected and twice as expensive fix clearly wasn't.
- People who completely unexpectedly get made redundant at a time when it's incredibly difficult to find other work - we saw this just two years ago with the pandemic - those who in other circumstances would have walked back into a another job in days went far, far longer. Even the best of emergency fund only lasts so long.
- People who get diagnosed with a serious or even in the long term terminal illness - and end up having treatment that means they cannot continue working. Yes, in some cases benefits are available but it's an unusual situation where benefits will cover all the outgoings of a previously fit healthy single person with mortgage etc to pay. And no - insurances don't always pay out when you think they might, in those circumstances.
That's just three examples, there are many more - and quite frankly, I'm not arrogant enough to think that just because I budget, have no debt, paid off my mortgage in 50% of the original term etc, that I'm immune to the possibility of any one of those things happening - it surprises me that in spite of the overall thrust of these boards there are STILL so many folk on here who are willing to sneer at those who are in debt, and look down on those who have never been in the position of being able to learn the skills of budgeting and money management. Being in debt is not always a choice, and it is most certainly NOT something that a person is always at fault for. 

EssexHebridean

casjen said:

There's no risk whatsoever in doing whole month DD. Calculate your next 12 months cost, ring  fence that amount each month as you add to it and then pay the bill out of it. Childs play. If you are stupid enough to spend  it then more fool you. Even a 5 year old could cope. People really don't have a clue these days.

OK - fine. So overall, your annual cost for electricity (which you use for hot water and heating as well as all the usual stuff) is in the region of £1500 - that's £125 per month.
So for October you set aside £125 - the bill comes in at £70 - leaving you £55 in "credit" in your energy savings. 
For November, you set aside £125 - the heating is now on so the bill comes in at £120 - £60 in credit. 
For December, you set aside £125 - it's got a bit chillier - the heating is turned up a little and the bill comes in at £150 - credit remaining £35
For January, you set aside £125 - still chilly - another £150 bill - credit £10
For February you set aside £125 - Brrrr - cold snap, snow, ice the lot - heating needs to be turned up more - the bill is £200 - and now you have to find the extra £65 from somewhere in order to pay that bill... Presumably you'd raid that poor 5-year old's piggy bank to cover the shortfall, as you have already been "stupid" enough to spend the money you'd previously put aside for energy bills on....well, energy bills? 

Al in all, I'd say your post has perfectly served to highlight what is being stressed here about it not being as straightforward as you seem to think. It CAN work really well - as suggested above, in the case of starting it at this time of year for those with sufficient income to "plug the gaps" before getting to a point where the system can work - but the very fact that people are over-simplifying and not thinking through the potential issues and pitfalls shows clearly why even those who seemingly think of themselves as being better with money than most could come unstuck here. By their very definition, these boards are a place where a lot of people come when they are for whatever reason struggling to pay the bills - and that has never been more true than right at the moment. Suggesting to those people that they are some sort of idiot for not being able to make a relatively complex payment method work is incredibly unhelpful.  I'll certainly semi-agree with your closing statement though - it does indeed become apparent that "some" people really don't have a clue these days.

Section62

TransmitThis said:

I don't believe any account (despite DD's not changing yet) will be hundreds of pounds in debit like your "chart" displays and carry that decefit all year.

A couple of posts before yours I explained how I had done exactly that.

It depends entirely on personal circumstances - i.e. distribution of annual energy consumption and starting date - and the figures tallmansix presented are entirely plausible. For some people.

inkydolphin

This is one of those issues where it's simply down to personal choice. There is no right or wrong (or cause for insults either way).

If going down the variable DD route it makes a lot of sense to keep a reserve of at least a month's payment in the money you set aside (like the energy company does with fixed DD).

Notepad_Phil

casjen said:

There's no risk whatsoever in doing whole month DD. Calculate your next 12 months cost, ring  fence that amount each month as you add to it and then pay the bill out of it. Childs play. If you are stupid enough to spend  it then more fool you. Even a 5 year old could cope. People really don't have a clue these days.

Okay so let's say in December that next 12 months cost is £2400, so that's £200 per month.

So Mrs Notepad puts away £200, then get's bill for well over £200 for her month's bill - where does she get the other chunk of money to pay that month's bill.

Astria

The_Green_Hornet said:

Variable direct debit is good for households who have a fair amount of disposable income and can pay out the higher amounts during the winter without having to put the money aside beforehand.

But those same households surely wouldn't care if they are paying the same amount each month as they have plenty of disposable income, they are also less likely to care about building up a large credit, and less likely to check what that credit is.

I'd say it's more likely to be used by the opposite kind of people who keep tabs on their credit, don't want to build it up too high, and very careful on their spending.

EssexHebridean

Astria said:

The_Green_Hornet said:

Variable direct debit is good for households who have a fair amount of disposable income and can pay out the higher amounts during the winter without having to put the money aside beforehand.

But those same households surely wouldn't care if they are paying the same amount each month as they have plenty of disposable income, they are also less likely to care about building up a large credit, and less likely to check what that credit is.

I'd say it's more likely to be used by the opposite kind of people who keep tabs on their credit, don't want to build it up too high, and very careful on their spending.

We got switched to variable when we went to GE as that's all their offer for the first 6 months with them, but in fact I'd already been considering it. I knew that our DD with our previous supplier had been too low once the cap increases were taken into account, so I'd already started setting aside the difference between the amount we were paying and the amount we knew we should be paying into a savings account. The £150 council tax money got added there too which bolstered it still more, and it's carried on building during the months we've been with GE because of the summer bills being so much lower of course. Having just switched to Octopus and being given the option of reverting to a regular monthly budget payment I have now switched back to that method - Octopus set my DD at a sensible level without suggesting it should be inflated, and have already assured me that I can pay a bit extra into my account with them at any time, so I'll probably do that at some stage ahead of the full on winter bills kicking in and landing me up in debt - by the sounds of it it won't worry Octopus but I'd rather know we are all square! 

ariarnia

[Deleted User] said:

Feel free to ‘stick it to the man’ if you like, but don’t try and claim that it’s for any other reason than that, and don’t try to abuse people who manage their life in another way.

exactly this. different options will suit different people and will be a net gain or cost depending on their circumstances. theres no one 'right way' to live. its childish to insult people because the way they want to do things is different from the way you do. some people will prefer variable payments some will prefer the same. some will prefer low credit balances. ours is unusually high because we like the security AND actually make a decent return annually holding a high balance with ovo because of their loyalty scheme. 

TransmitThis said:

I don't believe any account (despite DD's not changing yet) will be hundreds of pounds in debit like your "chart" displays and carry that decefit all year. 

you can believe what you want but your calling the people who have said their account lets them do exactly that liers and why exactly do you think they would lie about something like that to someone on an annonymous forum?

its just common sense that if you are expected to use 1000 units over a year and they set your dd to be 83 a month then someone joining in september will be in debt for most of the year when someone who joins in February will be carrying a lot of credit for most of the year. so someone this time of year switching to paying variable vs paying by annual dd would have less money in their account to gain interest over winter and therefore less 'profit' using your suggestion.