How to pay your energy bills
Energy bills can be confusing at the best of times – just figuring out what everything on your bill actually means can be tough, but then you need to look at the different ways you can actually pay for your energy, factoring in any discounts, and it can all become a little overwhelming.
If you go cold at the mere thought of paying your energy bills, this guide will give you a better idea of how each payment method works, along with some of the pros and cons of each.
Monthly Direct Debit
Paying gas and electricity by Direct Debit is the most effective way to make sure you pay your bills on time.
Direct Debit gas and electricity payments come out of your account on or around the same date each month, and you'll need to make sure your payments are enough to cover your monthly energy bill. But because the amount of gas and electricity you use will fluctuate from month-to-month, especially as the seasons change, it’s unlikely your monthly payment will exactly cover your monthly energy bill – you’re more likely to either overpay or underpay, depending upon the time of year.
If you regularly overpay, you will build up credit on your account, which means your in time your monthly Direct Debit energy payments will come down, or you can leave the money in your account to cover months when you use more energy and your bills go up. If you switch supplier while your account is in credit, you can claim any money owed from your supplier.
But if you regularly underpay, you will build up a debt on your account, meaning your energy supplier will need to increase your monthly Direct Debit amount in order to get you back in the black. If you rack up a significant amount of debt, your supplier can actually stop you switching until any money you owe has been paid back.
The major plus point with when paying by monthly Direct Debit is that this is usually the cheapest way to pay for your gas and electricity. Energy suppliers often provide discounts for customers who pay this way, as a reward for the convenience of receiving frequent payment towards your energy bills.
Quarterly Direct Debit
This payment method is exactly the same as a monthly Direct Debit, with the only difference being that the payments are taken quarterly to cover three months’ worth of energy use. More infrequent payments mean you have to set up your Direct Debits for a higher amount, but in the long-term the cost is generally the same.
You might find your energy supplier also offers a discount if you pay by quarterly Direct Debit, but it probably won’t be by a huge amount, and certainly not as significant as the monthly plan. As a result, most people will usually opt for the monthly plan, wherever possible.
Payment on receipt of bill
This is exactly what it says on the tin, and payments are made on receipt of your energy bill, which usually arrives every three months. This will include an accurate reflection of the amount of energy you've used during the previous quarter, and payments can be made in the following ways:
- By phone
- By cash or cheque at your bank
This is a good option if your needs aren't suited to a Direct Debit payments, but the bad news is that energy suppliers don’t offer any discount for customers choosing to pay on receipt of bill, so your bills will be higher than if you were to pay through Direct Debit.
You can also pay using a prepayment meter, where you pay for your energy usage upfront using a top-up key or token. Most homeowners try to avoid prepayment meters wherever possible, as these are typically the most expensive way to pay for your gas and electricity.
But if you're a landlord who is renting out a house or apartment, prepayment meters can be ideal as they make sure tenants never accumulate debt on an account. If you are a tenant and wish to switch from a prepayment meter to Direct Debit, then speak to your landlord. You can read more about prepayment meters here, including how to change from a prepayment meter to a credit meter, so you can pay by Direct Debit or upon receipt of your bill.
Does the way you pay affect the price you pay?
As mentioned above, the way you pay for gas and electricity can affect the amount you pay, below is a breakdown of the typical discounts given for Direct Debit payments:
|Payment method||Average annual bill before discount||Discount %age||Discount value||Cost after discount|
|Monthly Direct Debit||£1345.65||6%||£80.74||£1264.91|
|Quarterly Direct Debit||£1345.65||3%||£40.37||£1305.28|
|Payment on receipt of bill||£1345.65||0%||£0.00||£1345.65|
Prices are accurate at the time of writing and assume a medium usage of 3,100kWh electricity and 12,500kWh gas. All prices are based on E.ON Energy Fixed 1 year v4 (with Tesco points)