Financial guru Martin Lewis, has issued a warning to households that their energy bills may rise substantially if they are considering change over their direct debit payments.
With dual fuel prices set to rise considerably by October 1, the money guru is now advising families across the UK to keep their current repayment system set in stone.
According to regulatory body Ofgem, more than 50 per cent of their customers choose to pay bills via direct debit, and so, the MoneySavingExpert founder is recommending that households continue to opt for this means of paying - based on estimates of usage.
Read more: 'People are frightened': North East foodbanks react to energy price cap hike
The Mirror reports that Martin says that families who are looking to change over their payment plans may be in-turn affected more in the grand scheme of things. In a YouTube video, he responded to a MoneySavingExpert reader who quizzed whether she should cancel her direct debit and switch to paying her bill on receipt - to help better control finances.
He replied advising against the move, saying: "You will get a short term cash flow gain from switching to paying in receipt of bills. However, over the longer run, because you're paying more for each unit of energy you use, you will pay more in receipt of bills.
"Because if you overpay on direct debit you are entitled to that money back."
Following yesterday's price cap announcement, customers paying by direct debit will see their bills increase by some 80 per cent, from £1,971 to £3,549. While this doesn't come into play until October 1, Ofgem has warned that some suppliers could begin to increase costs before then to spread the cost.
For those who don't pay via DD, they will see bills ramped up from £2,100 to a staggering £3,764 - which means that customers will be looking at paying around £251 more per year for choosing to pay on receipt. Moreover, households who pay by direct debit are often better off by receiving automatic discounts - shaving hundreds off their bills.
Is my energy supplier allowed to increase my direct debit payments?
Short answer - yes. If you are on a standard variable tariff they can increase it to the level of the price cap. However, suppliers have a responsibility to make sure that their customers payments accurately reflect their energy use.
Justina Miltienyte of Uswitch.com explained, saying: “Consumers should keep an eye on their monthly direct debit payments and if they think they are too high or unaffordable, they should contact their supplier as soon as possible to avoid getting into debt or overpaying excessively.
“Any built-up credit balance can be refunded unless the supplier has a good reason not to, which they must explain. In normal times we would advise that consumers claim back this money before the summer, but given the price rises it might be worth keeping the balance there. Any extra money can act as a buffer against future price rises.
“It is important that Ofgem continues to keep a close eye on suppliers to ensure that any increase in customer payments are fair and reflect their usage.”
What Government help is available now?
There is a £400 non-repayable discount on almost all energy bills from October. Additionally, there is also a £650 one-off cost of living payment for eight million house-holds on means tested benefits.
And, pensioners get a one-off £300 cost-of- living payment, while those on certain disability payments get £150.
If you're struggling with energy costs or other bills there are plenty of organisations where you can seek advice for free, including:
- National Debtline - 0808 808 4000
- Step Change - 0800 138 1111
- Citizens Advice - 0808 800 9060
Read next:
- Your energy bills explained as new eye-watering price cap announced by Ofgem
-
Why pay-as-you-go meter and quarterly bill payers face a higher energy cap rise than direct debit
-
Energy bills to soar as Ofgem confirms price cap will rise to £3,549
-
Classes must stay open five days a week, says schools minister
-
Food supply fears return due to CO2 shortage as vital factory ceases production
