The cheapest way to pay off your energy bill has been revealed by Money Saving Expert (MSE) founder Martin Lewis. In his latest money saving tips email, he explained the most efficient method to cut costs on bills after the autumn price cap was finally confirmed.
From October 1, the price cap will rise to £3,549, Ofgem has announced, which is up 80 per cent from the current £1,971. Martin says however that the price cap varies depending on your payment method.
For households paying for default tariffs via direct debit, the £3,549 figure will still apply. But for Brits parting with their money via a prepayment meter - typically vulnerable households or those struggling to pay for their energy - the cost is slightly more, rising from £2,017 to £3,608.
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While those who are standard credit customers (where you pay once you've received your bill), will see their price cap rise from £2,100 to £3,764. Meaning paying through a direct debit is the cheapest method. It also enables you to know exactly how much is coming out of your bank account each month.
Direct debits are usually based on an estimate of the energy your supplier thinks you’re using, so it is important your supplier isn’t overestimating your usage, otherwise you could end up paying more. By supplying regular meter readings, you can ensure your direct debits are as accurate as possible.
Should you think you are being charged too much money, then it is best to contact your supplier and ask for a breakdown of your charges. Ofgem licence conditions set out guidelines for "fair and reasonable" direct debits - which means your supplier must take steps to ensure you’re being charged correctly.
"I've seen much confusion about this on social media," Martin said, "so I want to clear it up. The price cap depends on the payment method. Here are the new average price cap rates for someone ON TYPICAL USE. Direct debit: Up 80 per cent from £1,971 to £3,549/yr. Prepayment: Up 79 per cent from £2,017 to £3,608/yr. On receipt of bills: Up 79 per cent from £2,100 to £3,764/yr."
He added: “The prepay cap is two per cent more than direct debit, receipt of bills six per cent more. It can vary by firm - we're going to do some work on that."
“Ditching direct debit may help with your cash flow if your direct debit is set too high… but it's important to understand that in the long run you'll pay more, whereas if you overpay while on direct debit you're eventually due that money back.”
Approximately 24 million households are covered by the energy price cap, including four million on prepayment meters. The price cap sets a limit on the rates a supplier can charge for each unit of gas and electricity you use. It also sets a maximum rate for the daily standing charge, which is what you pay to have your home connected to the grid.
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