When looking across the spectrum of ways to pay for gas and electricity, the majority of energy customers in the UK choose to pay energy bills by monthly direct debit. Paying for your gas and electricity in this way, especially when receiving both supplies from the same company, can provide the best tariffs available and save you a great deal of money.
Not only that, once the direct debit has been set up, the hassle of making monthly or quarterly payments via phone, cheque or the post office etc, can be completely circumnavigated. Payments will usually be made monthly at an agreed amount that aims to equally distribute your payments across the whole year. This can be a key advantage for financial planning and household budget control and makes sure that increased energy consumption in the winter months will not also mean an increased hit to your pocket through higher bills.
If you also have a smart meter, you no longer even need to provide meter readings to your energy supplier, further increasing the autonomy and ‘hands off’ approach to keeping the lights on.
Keeping monthly outgoings consistent and taking a minimalist approach to managing gas and electricity bills is usually as straight forward and simplistic as it sounds. At the beginning of your relationship with any given energy supplier, an estimated annual usage of gas and electricity will be calculated and a direct debit will be worked out from that.
The longer you stay with a supplier or the better you get to know your own actual usage, the more accurate your estimated annual bill should become. This will be the total cost of your gas and electricity usage over the year and this figure is then divided by twelve to give a monthly cost, your direct debit amount and that will then not change unexpectedly throughout the year. On occasion this can cause a bit of confusion for customers, as in the summer months you may find that the monthly direct debit charge is higher than your actual usage and in some winter months it may seem as though you are not quite paying enough.
This is all completely normal and calculated into the direct debit fee when the account is set up. The aim is to ensure that the account has enough credit accrued during the summer months when usage is relatively low to cover the higher usage in the colder, winter months.
For most people setting up a direct debit will be the last time consideration is paid with regards to billing until it is time to renew a fixed term contract, or you’ve found a better price with another supplier. However, occasionally the direct debit can be set too high and the amount of credit in your energy account can rise beyond its intended purpose of providing a buffer for the winter. In these instances it is important not to panic. The money you have paid is yours, and you have every right to have it paid back to you, should you so wish.
When and how to claim
Credit being held in your energy account can be claimed at any time and you do not need to provide any reason to your energy supplier for doing so. All you need to do is contact your supplier and inform them that you intend to reclaim the credit. This can be done in various ways with the most popular being payment directly into the customers account, or a lowering of the direct debit amount to offset the difference.
A number of providers are now automatically paying any account credit sitting over £75 back to the customer. Companies adopting this scheme make the payments as appropriate without any need for the customer to reach out to the energy supplier.
It is worth considering that this could have the adverse effect of putting your account into debt further on in the year, so it is always worth careful thought before you decide to make changes to your payments. It may also be a good idea to contact your supplier for advice on the matter, as some companies will now automatically repay any credit held on accounts at the end of each year and then recalculate direct debits for the next 12 months.
That being said, it was found in 2019 that over £1bn of customer credit was held amongst the UK energy suppliers, with many of those in credit by over £100. You may want to consider if that money would be better served by being placed into a savings account, or even being used to pay off any higher interest debt that you may have.
There are advantages and disadvantages to keeping your account in credit. On the one hand, your gas and electricity payments are simplified through this process and in many situations, made much more manageable by splitting the annual cost across the entire year.
On the other hand, the money may be better used to help repay other debts or to accrue interest for you in savings or investment. Before making any final decisions, it is recommended that you ensure that you fully understand your projected energy usage and seek advice from your energy supplier. What may seem like a high amount of credit in the summer months, may just save you from higher than normal bills and debt during the winter.