Money Saving Expert's Martin Lewis has warned households to keep their repayments how they are. Gas and electricity prices are set to soar by October 1, and Martin has warned that energy bills could go up if families change their direct debit repayments.
He says that families who are looking to change their payment plans could be affected more in the long run. According to the industry regulator, Ofgem, more than half of customers pay their bills in the form of direct debit.
On YouTube, Martin responded to a question from a Money Saving Expert reader, who asked whether she should cancel her direct debit and instead switch to paying her bill on receipt to better control her finances reports the Daily Mirror. He replied: "You will get a short term cash flow gain from switching to paying in receipt of bills.
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"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 the recent price cap announcement, it has been revealed that customers who pay by direct debit will see their bills increase by 80%, from £1,971 to £3,549. The new price cap will not come into effect until October 1, but Ofgem has warned that some suppliers could start to increase direct debits before then to help spread the costs.
For those who do not pay by direct debit, they will see their bills increase from £2,100 to £3,764. Meaning customers could pay more than £251 extra a year if they switch from direct debits.
Households who pay by direct debit are often better off due to automatic discounts, which can save hundreds of pounds. Your energy supplier is allowed to increase your direct debit payments if you are on a standard variable tariff so they can increase to the price cap.
However, all suppliers must make sure that their customers payments accurately reflect their energy use. Justina Miltienyte of Uswitch.com, said: “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.”
There will be a £400 non-repayable discount on almost all energy bills from October, as well as a £650 one-off cost of living payment for eight million households on means tested benefits. Pensions will also be able to get a £300 cost of living payment, and those on certain disability payments will get £150.
If you are struggling with energy costs or other bills, you can seek advice for free with the National Debtline, Step Change or Citizens Advice.
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