Fixed monthly direct debit
If you choose to pay for your energy by fixed monthly direct debit, your supplier will estimate how much energy you’ll use over the coming year and divide this into 12 monthly instalments.
It will then set up a direct debit for this amount to come out of your bank account each month. A direct debit means the money is automatically sent from your bank account to the supplier’s bank account.
Energy companies reserve their cheapest deals for customers willing to pay their bill by monthly direct debit.
Obviously, your energy usage will fluctuate from month to month across the year, so you’ll find that in the warmer, lighter summer months you’ll be overpaying, while in the winter you’re likely to be underpaying.
If you build up a large credit on your account (you should be able to check on your provider’s website), you can ask for the money back. But if you don’t pay enough your supplier can ask for a top-up payment or suggest increasing your direct debit.
The benefit of having a direct debit is that you don’t need to worry about missing payments – as long as you have enough money in your bank account to cover the amount.
Paying by monthly direct debit will also help smooth out your household budget because it removes the shock impact that a large quarterly bill can cause.
Variable monthly direct debit
It is possible to set up a direct debit to your energy company just for the amount you owe each month.
This avoids any issues with over or underpaying, but you will need to supply your meter readings to your energy supplier on a monthly basis to make sure you are billed correctly.
If you pay by monthly variable direct debit, you will pay more during the colder months and less in the summer, so you'll need to have some flexibility in your budget.
If there isn’t sufficient money in your account when the payment is due you may incur bank charges or the payment may be refused.
Quarterly direct debit
If you choose to pay for your energy by quarterly direct debit, your energy supplier will bill you for the energy used in the past three months and take this sum, however much it might be, from your bank account.
Paying quarterly means you don't have to worry about money being taken from your account every month, and you can save up for the payments to come out every three months.
However, one of the disadvantages of paying quarterly is that, rather than paying a smaller amount each month, you have to find a much bigger lump sum each time as you are paying for three months' gas and electricity usage at a time.
Your bills are likely to be much more expensive in the winter than during the summer, so you will need to budget accordingly.
Some suppliers offer a discount if you pay your bills by quarterly direct debit but it won’t be as much as the discount for paying by monthly direct debit.
Payment on receipt of bill
Households can choose to pay for their energy on receipt of a bill every three months. The bill can be paid by cash, cheque, debit card or credit card.
Cash payments can be made at the bank or Post Office; cheque payments at the bank, Post Office or by post; and card payments by phone or online.
Payment on receipt of bill is sometimes referred to as “quarterly cash or cheque” (QCC).
Customers who send a cheque need to make sure it’s sent in time to make the payment deadline.
Customers who always pay on time may be eligible for a “prompt payment” discount, although this won't be as much as the discounts available for customers who pay using direct debit.
Households paying for energy on receipt of a bill have more control over their payments but they will need to manage their budget so the money is available when the bill arrives.
A payment card is a way of paying for your energy and spreading the cost of your bills. A payment card needs to be topped up at a PayPoint or a Post Office. Customers can make flexible payments or pay weekly, fortnightly or monthly.
Paying your gas and electricity using a payment card gives you more control over your finances as money is not automatically taken from your account.
You can make payments whenever you can afford to. All payments are shown on your quarterly bill and any remaining balance will need to be paid in full when you get your next bill.
The main disadvantage of a payment card is that customers need to go to a Post Office or PayPoint to make payments, and they cannot make payments online.
You won’t get a discount if you pay by payment card so you’ll be paying more than if you paid by most other payment methods.
A prepayment meter is a type of domestic energy meter that uses a ‘pay-as-you-go’ tariff. It requires consumers to pay for their gas and electricity in advance by adding funds to a key fob or smart card that is then inserted in to the meter.
Some suppliers also allow top-up online, by text or via smartphone app.
Prepayment meters are the most expensive way to pay for your gas and electricity. They are usually used by lower income households or those who don’t pass the credit check needed to pay for energy quarterly or monthly.
Some landlords install prepayment meters to ensure tenants cannot accumulate a debt on their energy account.
Payment by app
In most cases the apps are available for Android and iPhone and allow customers to track their usage, see their balance, and top-up their account without a key or leaving the house.
Scottish Power’s Power Up app works in a slightly different way. It allows customers to purchase ‘days’ of gas and electricity upfront. The bigger the package you buy, the cheaper it is.
If you are receiving certain benefits and in debt to your energy supplier, you may be eligible for Fuel Direct.
This Government scheme, also known as ‘third party deductions’, enables you to repay your debt directly from your benefits. This will ensure your debt is repaid and will make it easier to budget your money.
The benefits which can be used are: Universal Credit, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance, Income Support, and Pension Credit.
You can apply for Fuel Direct through JobCentre Plus. It will need details of how much you owe, the relevant suppliers, your customer reference number(s), and your National Insurance number.
In some cases, you may be able to use Fuel Direct to pay your energy bill too – but this will stop once your debt is repaid.
Need help with your energy bills?
If you are struggling with your energy bills, there are a number of Government schemes that can help.
Winter Fuel Payment: The Winter Fuel Payment is an annual tax-free payment of between £100 and £300 to help those over Pension Credit age with winter heating costs.
Cold Weather Payment: The Cold Weather Payment is a £25 grant given to people on qualifying benefits when the temperature in their area drops to zero degrees Celsius or below for seven consecutive days.
Warm Home Discount: The Warm Home Discount is a £140 credit on your energy bill during winter if you meet certain qualifying criteria and your energy supplier is signed up to the scheme.