Martin Lewis’ urgent warning for households over direct debits that could see you paying more | The Sun

MARTIN Lewis is warning households that their energy bills could go up if they ditch direct debit payments.

Under the Energy Price Guarantee (EPG), the typical household will pay £2.500 a year for their energy bill.

More than half of consumers pay their energy bills by direct debit, according to industry regulator Ofgem.

But some households might be thinking about switching their payment method to control their finances.

That's because direct debits are based on estimates of usage.

But Martin Lewis, founder of MoneySavingExpert, said this could end up costing households more in the long run.

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During an appearance on This Morning, Martin took a call from an Ovo energy customer who was considering cancelling her direct debit.

But he cautioned the customer against the decision, as it could end up costing more in the long run.

Martin said: "The reason I say I don't want you to cancel your direct debit is if you move into payments into receipt of bills. That is what most people do when they cancel direct debits.

"That is around 8% more expensive. You will pay 8% more on top of the already huge rates to pay your bills."

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It comes after energy firms were accused of hiking direct debits, even when households were in credit.

Households that pay their energy bills by direct debits take advantage of the lowest gas and electricity rates.

Those on prepayment meters or who pay on receipt of bills pay higher unit rates.

The EPG only limits the amount that firms can charge customers for each unit of energy.

So if you use more energy than the average household – expect to pay more than £2,500 a year.

But the majority of households that pay by direct debit don't end up paying for the exact amount of energy used each month.

Households can use an energy usage calculator like the one provided by MoneySavingExpert.com to compare the true cost of their usage with their direct debit amount.

How do energy direct debits work?

There are two main types of energy direct debits – fixed and variable.

Most energy customers pay a fixed direct debit, which means you pay a fixed amount every month.

Your energy company will work out the cost of your energy for the year ahead and divide this into equal payments.

Most energy firms will use the average amount of gas and electricity used in previous years to calculate your monthly instalments.

With a fixed direct debit you can spread the cost of your energy use without any surprises.

If your energy supplier has upped your fixed direct debit amount even though your usage is down, you can request that the fixed monthly charge is brought down – we've explained how to challenge your bill below.

Those on fixed direct debits are more likely to build up credit during the warmer summer months and if you're in credit but your direct debit has risen substantially this winter it's worth challenging it.

But some energy companies give customers the option to pay with a variable direct debit.

With a variable direct debit, you can choose to pay a varying amount every month or every quarter, depending on the energy you use.

You’ll pay for the energy you use, this means you'll likely pay more in the winter and less in the summer.

Some experts argue that this type of direct debit method makes it harder for households to budget in the colder months but if you only want to pay for what you use each month then a variable direct debit may be a safe bet.

How to challenge your bill

Before you dispute your bill it's worth using an energy calculator to work out exactly how much your usage costs on paper.

You also need to be aware of your rights.

If you pay by direct debit, then this monthly amount should be "fair and reasonable".

If you don't think it is, you can complain to the company in the first instance.

If you're not happy with the outcome you can take it to the independent Energy Ombudsman to dispute, but there are a few steps before you get to that stage.

Your supplier must clearly explain why it's chosen that amount for your direct debit.

If you've got credit on your account, you have every right to get it back – although some experts recommend keeping it there through the summer, so your bills don't go up in the winter when you use more energy.

Your supplier must refund you or explain exactly why not otherwise and the regulator, Ofgem, can fine suppliers if they don't.

If you are disputing a bill, taking a meter reading is a must.

That way the company can't rely on estimates, which may lead to you being overcharged – a reading leaves no room for error either, as it shows precisely what you actually used.

If it's lower than your estimate, you can ask your provider to lower your monthly direct debit to a more suitable amount.

Martin Lewis' MoneySavingExpert team says that if you find you're always in credit, you should request the direct debit be lowered to reflect your actual annual usage and meter readings.

But beware that you don’t end up in debt later on with a bigger catch-up bill at the end of the year from underpayments racking up.

If you don't have success in negotiating a lower payment then you can put in a complaint.

You can usually get in touch with your provider by email, letter or telephone, but keep a record of contact that you make so you can reference it later if need be.

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Charities like Citizens Advice have template complaint letters you can use to help with the process.

Meanwhile, free online tools from Resolver.co.uk can also help you track and manage a complaint step-by-step. 

Do you have a money problem that needs sorting? Get in touch by emailing [email protected]

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