Energy Guides

Energy payment methods

Article updated: Friday 22 June, 2012

By Martin Fagan

You could save hundreds of pounds on your annual energy bills by switching energy supplier. But did you know the way you pay the bill can also make a big difference?

By changing your energy tariff or supplier, and switching your payment method, you could really maximise your savings. Read on to find out how...

• Cash or cheque
• Direct debit
• Paperless billing
• Prepayment meter

Cash or cheque

Phoning your provider to pay your bill by credit or debit card, or by taking your bill into the bank or Post Office to pay it in cash or by cheque, is the traditional way to pay.

While this payment method allows you to control roughly when the money leaves your account, some banks and building societies charge a fee for processing bill payments of this nature so be careful of how and where you pay.

Although you won’t be charged an additional fee by your energy supplier for choosing not to pay by direct debit, you won’t be able to take advantage of any of the extra discounts offered by energy providers as a reward for guaranteeing you always pay up on time.

Direct debit

Monthly direct debit is the cheapest way to pay your bill - read our direct debit guide for more information. Many energy suppliers offer discounts to customers paying in this way as it ensures that their bills are always paid on time. In fact, some energy suppliers only offer their best deals to customers who do pay by direct debit.

For example, British Gas (www.BritishGas.co.uk) will only offer its WebSaver range of tariffs, which currently offer a 6% discount on both gas and electricity, to customers paying their bills by direct debit. E.ON offers an incentive of an average 8% discount on your bill if you pay by direct debit.

The biggest concern for many people paying in this way is that you will need to ensure there are sufficient funds in your account to cover the bill payment. Make sure you know exactly what date the payment will be taken on, and have enough in your account to cover it - otherwise you’ll be fined by your bank, and the payment might even be refused, resulting in a further fine by your energy supplier.

Most people get around this by setting their direct debit payments to leave their account a few days after their wages are paid in.

Some suppliers also offer to take direct debit payments from special prepayment accounts for those who don’t have a bank account, or an account that doesn’t allow direct debit payment payments. Check with your supplier to see if they offer this service.

Paperless billing

Signing up for paperless billing and online account management is a great way to boost your savings when you switch. It’s better for the environment and saves suppliers money on postage, paper and technicians to read meters - savings they can then pass on to you.

As well as the discount that many suppliers offer for signing up to paperless billing and online account management, you’ll also be able to eliminate the risk of over-paying on estimated bills.

As an "online only" customer, you’ll take your own meter reading and enter it on the energy company’s website where you’ll be able to access and amend your account, see direct debit payment details and pay your bill, if you’re not a direct debit customer.

Paperless billing accounts are only available to credit meter customers, not prepay meter customers.

Prepayment meter

Paying for your gas and electricity using a prepayment meter - where you top-up a card or key and pay for your energy as you use it - is generally accepted to be the most expensive way of paying for your fuel.

This is because the meters are set at standard rates and you’ll be unable to take advantage of any online discounts, or reductions for direct debit payments. Also, some older prepayment meters have to be manually updated, so you won’t benefit from price reductions until this is done.

According to Ofgem figures, prepayment customers stand to make the biggest savings by switching provider and going on to a credit meter.

If you’re concerned about being able to manage the cost of your energy bills, you could sign up to a fixed-rate tariff, which will still offer savings, while guaranteeing that your payments will be static for the next couple of years.

A prepayment meter isn’t the best choice if you’re struggling to keep up your fuel payments. Instead, speak to your energy supplier, who might be able to move you onto a special “social tariff” for vulnerable customers.

Save on your energy bills...

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