Are you being drained by your direct debits?

Direct debits can help you get ahead with payments in summer, but monthly payments can often be increased when customers are already in credit
Direct debits can help you get ahead with payments in summer, but monthly payments can often be increased when customers are already in credit
Dr John Steadman, archivist of Portsmouth History Centre based at Portsmouth Central Library     Picture:  Malcolm Wells

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With rising temperatures across the country, consumers could be forgiven for expecting a break from soaring energy bills.

After all, prices might be high, but suppliers can’t charge you for gas or electricity you haven’t used – can they?

Well the answer, if you’re part of the more than 50 per cent of customers who pay by direct debit, is a resounding yes.

By averaging out your usage and charging a single price each month, energy companies ensure themselves a steady, reliable cash flow.

And on the face of it they are also helping people to plan for those colder, darker winter months when household usage sky-rockets.

But recent research by Which? magazine found that the majority of customers paying this way end up being overcharged by an average of £161.

It’s a familiar story for many people. You get your bill, realise you’re overpaying and contact your supplier to ask for a refund or a reduction in your monthly payments.

Only getting the company to agree to this can be more difficult than you would expect.

The same research found that, of those surveyed who had their direct debits increased, 59 per cent were already in credit.

n So why does this happen?

Well the inexplicable increases, and sometimes decreases, can be traced back to the same reason customers often receive a discount for paying this way.

Most suppliers now use an automated system which calculates how much it think you will use over the year and sets your direct debit accordingly.

This saves time and money, but can go horribly haywire if the information provided to it isn’t accurate.

And working out where these estimates come from can also be frustratingly unclear.

They are calculated by looking at your past usage based on the meter readings the company has received, so if these are wrong your direct debit will be as well.

Then, if there isn’t enough historical data on their files, they will also look at how many people live in your house, how big it is and what appliances you have.

And just to complicate things further, the direct debit might not be calculated over 12 months, but 10, 11 or 13 instead.

There are also regional differences in price, often due to the varying costs of transporting power around the country, which make straight comparisons difficult.

n Why does it matter?

Direct debit increases are one of the biggest source of complaints, not just to the big six energy giants, but across the spectrum.

Often the changes are warranted, despite the large amounts of credit in your accounts.

Most customers need to build up a bank of payments during the warmer months to prepare for using more during the winter.

But seeing your direct debit rise when a company already has more than £150 of your money is infuriating for many customers.

And while they are getting better at informing us of these changes, the reasons behind them can still be extremely opaque, leaving you with no idea if the company is being sensible or holding on to your cash when it should be returning it.

They might insist they don’t earn interest on the money they hold, but it’s not in your bank account earning you interest either.

n What can be done?

The most effective way to make sure your direct debit is not being miscalculated is to provide your own meter readings.

Read your bills, see if your readings are estimated, and check them against your meter.

Call up and don’t be afraid to ask for help reading your meter if you are unsure.

And make sure it tallies with any information they have on file – metering mix-ups are far harder to sort out than inaccurate readings.

If you do this often enough then the company will have no excuse for getting your usage wrong.

This will mean you have far more chance of obtaining a refund or a direct debit reduction.

You can even ask to be taken through how your direct debit is calculated if you are confused. Most customer service advisers should be able to do this easily, allowing you to take notes for your own records.

But if you do get a nasty surprise and you’re using more than you thought, think hard before demanding a refund.

Being left short when the cold weather comes back around will only lead to higher monthly bills and more stress.