Energy Bill Payment Methods: Which one is best?

Payment Method

What’s in this guide?

Introduction

Energy suppliers offer many different methods for you to be able to pay for your energy, depending on your circumstances and what would be best for you.

However, you should know about all the different types of payment methods in case your situation changes.

Sometimes, you might need a different method at different times.

This guide will tell you everything you need to know about payment methods for your energy bills, including what they are and what they are best for.

Let’s dive in and take a closer look.

Fixed monthly direct debit

First, let’s go over the most popular form of payment method; fixed monthly direct charge.

Why is this the most popular form of payment?

Because with it, you pay for your bills automatically which can help regarding avoiding forgetting paying for your power.

For instance, you may already pay for your mobile phone by direct debit every month. Your bank statement might say the name of your mobile phone provider, with the price next to it, for instance, £10.00.

You can then rest assured that you don’t need to remember to pay your mobile phone bill, as it will come out of your chosen account automatically.

Reports state that approximately 8/10 people think that paying by direct debit worked well for them, which makes it one of the most popular payment methods.

So now that you know what a direct debit is, how does it work?

First, you set up a regular payment between your chosen bank account and your energy supplier.

Second, this gives your energy supplier permission to take that payment from your account on a specific date from now on.

Third, your bank is then sent a confirmation of this information and will authorise the payment.

This means that you won’t need to remember to pay your energy company, which avoids problems such as your power being cut off as it’s automatic.

A fixed monthly payment means that it’s the same each month, which can help with budgeting.

Variable monthly direct debit

On the other hand, it is possible to have a monthly direct debit that has a variable cost.

Variable monthly direct debits mean that in winter, your prices will likely increase due to the more energy you’ll need to use.

In summer, these prices will probably decrease as you will need to use less electricity and gas.

This means that you might find it a bit harder to budget as the prices won’t be transparent until you receive your bill.

You also need to keep in mind that if you can’t make these unpredictable monthly payments, you might incur some bank charges or your payment might be refused completely.

Quarterly direct debit

Quarterly direct debit means that your energy company will bill you for the last three months of your power, so this will be three times the amount you would have paid for one month.

This could be very useful as it gives you the opportunity to save up for these more expensive quarterly payments, and it will mean that you have a bit more cash flow for those another couple of months.

One of the main cons to paying by quarterly direct debit is that your payment is going to be far larger as you’ll be paying for three months of electricity and gas.

Some suppliers might offer you a discount for paying by quarterly direct debit, but the discount you receive won’t be as much as the one you could get by paying by fixed monthly direct debit.

Your bills might be more expensive in winter than in summer, so you’ll have to keep this in mind to avoid not being able to pay for your power.

Payment on receipt of your bill

Similarly to the monthly direct debit, paying on receipt of your statement will also happen every three months.

This can usually be paid by either debit card, credit card, cash or cheque, making it more flexible regarding payment methods than others.

You can pay cash payments at the bank or Post Office.

You can make cheque payments at the Post Office or by post.

Card payments by phone or online.

If you always pay for your energy on time, you may be eligible for a discount. Keep in mind that this discount won’t be as much as it could be when paying by direct debit.

When you pay on receipt of your bill, you’ll have a lot more control of your payments, but you also need to keep track of your budgeting if you are paying by cash or cheque.

Prepayment meters

With a prepayment meter, like a pay as you go mobile phone, you top up your energy before using it with a top-up card, key or some suppliers allow you to prepay online or with an app like Powershop.

Your ‘credit’ which you purchase then decreases as you use your energy, so the more power that you use, the quicker you will run out of your credit.

If you run out, your power will shut off unless you are with a supplier that offers emergency credit.

You can also switch credit from your electricity meter to your gas meter or vice versa in emergencies.

A top up of £10 would only last four days, assuming that you use the average of around £2.44 a day. This is why forced prepayment tariffs are meant to be a last resort, as they are far more expensive than the fixed or variable rate tariffs from the same company.

According to reports, the cheapest prepayment tariff would still be more expensive than the cheapest fixed rate tariff.

Payment card

A payment card spreads the cost of your energy by allowing you to make flexible payments every weekly, fortnightly or monthly.

You can top up cards at a PayPoint or a Post Office. This gives you more opportunity to control your finances as you get to choose when you pay instead of automatic payments.

The main con for payment cards is that you have to physically go and top up at a PayPoint or Post Office. You also can’t make any payments online as you could do with other payment methods.

You also won’t be offered any discounts, which is for those who pay by monthly direct debit or manage their accounts and correspondence online.

Pay via an app

An energy app is an application that means you use your account to log in and view information about your energy

For instance, with the British Gas app you can use your iPhone or Android device you can do these things:

  • Register for a new account
  • Submit gas and electricity meter readings
  • Pay bills and view account details
  • Change direct debit payments
  • Monitor your energy usage month to month
  • Book an engineer

This makes it far more convenient for customers to do things such as submit meter readings and book boiler services.

The Apple app store or Google Play allows you also to see how other customers have found your supplier’s app before you download it.

Vincent M. Campbell on Google Play: So cool Takes the trouble out of managing bills would recommend it to everyone wish other companies had the same type of apps

Fuel direct

If you receive certain benefits and you’re in debt, you may be eligible for something called fuel direct.

This is a government scheme that is known as ‘third party deductions’, and enables you to repay your debt by using your benefits.

Fuel direct help you repay your debt, and it will be easier for you to budget.

The available benefits are:

  • Universal Credit, income-based Jobseeker’s Allowance
  • Income-related Employment and Support Allowance
  • Income Support
  • Pension Credit

You can apply for fuel direct by going to the JobCentre Plus.

This is what you will need:

  • Knowledge of how much you owe
  • The relevant energy suppliers
  • Your customer reference number/s
  • Finally, your National Insurance number

In certain circumstances, you may be able to use fuel direct to pay your energy bills as well, not just your debt.

However, this will stop once you have paid off your debt.

Conclusion

Are you looking to switch energy suppliers?

Did you know that you could be saving £500 annually on your energy bills every year?

Take a look at the EnergySeek guides to find out more about your energy, or see reviews of the top 7 energy switching sites to compare gas & electricity.