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Paying by cheque for utilities? That’ll be £100 please

New Which? Money research has found that paying energy bills by cash or cheque could be almost £100 more expensive a year than paying by direct debit. Can this extra cost really be justified?

Earlier this year a groundswell of public support for the cheque prevented it from being consigned to the scrapheap for good. Happy days then? Well, not if you’re actually planning to use them.

Cheques might still be in existence, but the cost of paying your bills with them appears to be ever increasing. Our investigation into payment methods showed that energy customers paying by cheque are being penalised for the privilege.

The difference in price between paying by quarterly cash or cheque and by monthly direct debit can be high – we found it could reach an average of £98.60 over the course of a year.

Direct debit cheapest for energy

Energy companies normally offer a discount to people who pay by direct debit, since it guarantees payment and makes your account easier and cheaper to manage.

If you pay by cash or cheque, some companies do offer prompt payment discounts if you’re able to pay on time. But these won’t be nearly as high as the ongoing discounts given to direct debit customers.

When it comes to payment methods, research by charity Age UK shows that use of direct debits to pay utility bills decreases directly with age, particularly among the over 70s. But it’s not just older people – many younger customers, especially those in lower-income households, also feel that direct debit gives them less control over what’s going out of their bank account.

Cheque users paying over the odds

We’ve written several times about cheques here on Which? Conversation and the response has always been the same – there are countless situations in which the cheque is the most suitable method of payment and people shouldn’t be unfairly penalised for using them.

While it may suit the energy suppliers to manage direct debit accounts, many of us still prefer more traditional methods. Some simply have no choice.

It’s vital that energy companies develop fair and inclusive systems that ensure all of us are given a fair deal. Any extra charges need to reflect the actual costs to suppliers, and I’m not totally convinced that this is happening.


It is right that those paying by cheque should pay more, because paper-based payments are costly to process and not environmentally friendly. However, the additional cost should be a reasonable fixed amount per cheque, not a percentage difference in price of the utility service being paid for. Furthermore, customers paying electronically, e.g. by BACS, FPS or CHAPS, should not be surcharged at all, as it costs utility companies no more to accept other forms of electronic payment compared to direct debit. Many consumers do not feel comfortable with direct debits, and they should not be penalised by utility companies if they wish to pay by other electronic methods that put the customer, and not the utility company, in control of their bank account.

Peter H says:
25 November 2011

I strongly support the point made by nfh. Yes I can see paper processing may cost a bit more, but Direct Debit is just a method for giving your supplier an interest free loan. Why is BACS/FPS never recognised by utilities and other suppliers as a low cost payment method, or is that a silly question?


They probably argues that folk why pay by cheque do not get charged more ..but folk who pay by DD get charged less…lol .
I do think it is unfair that there should be a large differential between those who pay by different methods . What I would like to see is a means of entering readings monthly and you then pay what amount is generated by those readings .

Lucia says:
23 November 2011

I listened with great interest to BBC Breakfast as they were talking about how people, especially older people, who do not pay their energy bills by direct debit end up paying more money.

In today’s society of democracy and supposedly CHOICE many organisations, but in particular Energy Companies are DISCRIMINATING against people who do not want to pay by Direct Debit.

I (along with no doubt millions of other people) who am in my 50s choose not to pay by direct debit, but to pay the energy bills every quaterly. I pay promptly and I use the automated telephone paying method. NOT A PAPER CHEQUE.

Also, as I run a tight budget every month via the automated service I provide the Energy Company with my meter readings so that I do not receive an estimated bill.

The reason I do not pay by direct debit is so that my money stays longer each month in my current account earning me a very small interest, but at least still earning me an interest. However, the more money that goes out of my account each month by direct debit then there is less capital earning me interest.

Thus for older people, even an extra pound earnt in interest is important to them.

In addition, Energy Companies, particularly NPower, waste a lot of paper by sending their customers reminders more than a week before their quaterly payments are due, rather than perhaps three days after the bills were due.

Furthermore, particularly with NPower, if you complain to a Customer Service Advisor, it is recorded on their computer system, supposedly, and then about a week or so later you receive an automatic computer generated letter thanking you for the information (more wasted paper). But the letter does not tell you what you complained about and nothing has ever come of any of my complaints.

The amount of money wasted by Energy Companies sending replies that do not mean anything and other useless information could be saving the consumer a vast amount of money, especially older people who need to keep warm in winter.

Why are Energy Companies not giving discounts to ALL their customers that pay promptly whether every month by direct debt or quaterly by cheque, telephone or over the counter when these companies are making huge profits?????

Sally Spencer says:
25 November 2011

I used to pay by direct debit but didn’t set it up when I moved house about three years ago. I’m extremely glad I didn’t because I’ve just spent the last three months trying to get British Gas to sort out a problem with a quarterly electricity bill that came in at over £5,000! Heaven knows how they would have calculated a monthly direct debit payment on that basis. I simply don’t trust them to charge me the right amount any more and, as I always pay on receipt of the bill, I don’t think I should be penalised for paying by cheque.


The real issue is not paper vs paperless payment- it must clearly cost more to process a non electronic payment than a cheque, though by how much is debatable. No, the real issue is being charged a penalty for not allowing the supplier to effectively pick your pocket at will with a direct debit mandate. I have never had a dd set up that has not sooner or later caused problems and it’s a funny thing, the error is never in my favour. There should be no price difference between an electronic payment and a dd and the penalty for paper payments, if not zero, should be a fixed small charge reflecting the actual processing cost, not some increase in the unit cost of the service provided.


Heh, the reason that I refused to pay by DD to Scottish Power instead of quarterly cheque was that TWICE over the past 10 years they got my Economy7 and Daytime units the wrong way round, resulting twice in bills for £3,000 for summer quarters!! On the first occasion they only agreed to even look into it because of my persistence and finally getting my MP involved, otherwise I’d have carried on paying £12,000 annually for my leccy!!!! On the second occasion they dealt with it faster, but they’d had it the wrong way round for 2 years plus & just noticed late – eventually instead of my owing them £3,000 it transpired that they owed me £1,200 and I got a cheque!! refund a month later.

So you can see why I wouldn’t trust them with a DD – they’d have rapidly wiped out my bank account and my life savings, and I imagine getting that money back would have been a helluva lot harder than dealing with them when they thought that I owed THEM …!!

I have since just changed to OVO, and they get excellent ratings for customer service, so I’m happy to arrange a DD for them – and take my own readings in future! BTW, half the £200 savings I’ll make from doing this is in the form of no longer having to pay Scottish Power’s outrageous ‘Daily Service Charge’ of over £0.40p daily – on top of their other standing charge. Daily Dis-service more like…

DavidB says:
25 November 2011

Processing cheques is labour intensive and it is right that those who pay by efficient cost-effective methods (eg Direct Debit) should not have to subsidise those who choose to pay by cheque. Charges for cheque payments should, however, be a true reflection of the actual additional payment processing costs.
About 30 years ago I was reluctant to pay anything by DD as retailers were not required to specify when payment would be taken. Today, however, I have no hesitation in using DD as you are told in advance of the date when payments are taken and have the DD Guarantee as a simple recourse if a retailer gets it wrong. DD is a secure method of payment, is easily set up (does not require the internet!) and puts the account holder in full control. In contrast, cheques are much more open to fraud – your name, branch, account number and sort code are all printed on the cheque which is seen by several inputters. You can never be certain that cheques put in the post will arrive and be cleared by due date.
Cheques do not carry any sort of consumer protection. Otherwise there is the DD guarantee, Debit Card Chargeback, and Credit Card Section 75. Thankfully I was able to convince my elderly father of the benefits of paying by DD particularly in saving money on utilities.
Which? needs to do more to spell out the pros and cons of the different methods of payment.