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Are your bills higher because of how you choose to pay?

There’s no pleasant way to pay the bills, but being charged extra for how you choose to pay is rubbing salt in the wound. Did you know that not paying by direct debit and getting paper bills could cost you £243 a year?

We totted up charges for customers paying for broadband bundles, mobile phone and energy by bank transfer, and receiving itemised paper bills.

And we compared them with those who paid the same bills by direct debit and managed their accounts online.

Say you’d rather pay a bill by bank transfer rather than direct debit. Some companies will charge you up to £60 a year extra for the privilege.

And say you want paper rather than online bills, well that could be an extra £22.80 a year.

It’s reasonable for companies to cover their costs but we think they could be charging customers more than they need to.

Penalised if you avoid online banking?

Many people find managing their accounts online and by direct debit is cheaper and more convenient. But not everyone is able to, or even wants to.

Many of those who want to keep paper bills might not have internet access, for example. But they’ll have to pay up to £1.54 extra a month for an itemised mobile phone bill.

These aren’t the only areas where paying the way you want will cost you. We also found that you have to pay by direct debit to get many of the cheapest energy tariffs.

Meanwhile, you could pay up to £6 if you want a hard copy of your credit card statement.

You can find out which companies apply the biggest charges here.

Should the best savings rates be online only?

It doesn’t end there. In this day and age, not having internet access could mean that you miss out on the best-rate savings accounts. At the time of our investigation, half of the 10 top-paying easy-access accounts on the market were online-only.

Is it fair that these deals are only available to internet-savvy consumers?

How do you prefer to pay your bills? Are you being charged extra for making payments in the way you want to – is it worth the extra cost?


Obviously one customer’s discount is another’s surcharge and it might be better if tariffs were expressed in those terms. I don’t think there should be any utility tariffs that can only be accessed by people who have internet access; that is unjustifiably discriminatory because there are people who cannot possibly access the internet for a whole range of reasons.

In my view there should be a ‘reference price’ for any tariff which can be payable by cheque at no additional charge. Personally I prefer to pay regular household bills by direct debit for my own convenience and don’t really see why there should be a discount, but if companies want to offer that as a marketing strategy so be it – but it should not be funded by those customers who prefer to pay by cheque. The difference between the two rates should only reflect the actual cost to the company of handling cheques. over and above the cost of receiving the equivalent amount in direct debits [they are not free – banks charge companies a lot of money to operate collection accounts and companies spend a lot of money each year on the administration and management of direct debits]. The big advantages to companies of collecting income via direct debits is the reliability of payments, the reduction in arrears, and the lower propensity for disputing or switching.

Paperless billing is similar as there are direct and measurable costs in generating and posting paper bills to customers. Indeed, given the costs of postage, stationery, computer time, energy, technical support, administration and management I am surprised that each paper bill doesn’t have a cost of around £2, so it seems fair to me that people who save companies that expense should benefit.

A lot more transparency all round would help.

I largely agree with John. If it costs less for a company to service an on-line account with direct debit, no paper, no postage, reliable on-time payments etc then the customer who is prepared to deal that way should benefit from the savings. However those savings should reflect the companies savings (plus any incentive they feel appropriate to persuade customers to deal on-line).

The argument about people being discriminated against if they cannot access the internet is one I have some sympathy with but it is not one that these days can be sustained. Look at all the purchases you can make online at prices you cannot get in the shops, whether it is for high-cost home appliances, cars even, down to books, batteries and so on. I’m afraid you cannot close that door.

I should have explained myself better. My objection to discrimination against people without internet access related only to essential utility tariffs, not other forms of commerce.

I can think of some other essentials, such as home insurance.

The extra charges that Joe has mentioned in his introduction look more like profiteering than genuine additional costs.

Which? made a successful super-complaint about excessive card surcharges a few years ago. It looks as if we need action to tackle unfair surcharges for certain forms of payment of bills.

Energy companies are keeping many customers in credit by hundreds and occasionally thousands of pounds. I would like to pay exactly what I owe by direct debit but unless things have changed, that is not an option. Yet Scottish Power have managed to change my direct three times since the start of the year.

It’s time to start to run this country for its citizens and not to serve the needs and whims of business.

I support John’s comments about utility tariffs but there are other essentials such as home insurance.

As I posted in reply in another conversation:

“You can buy energy from a number of suppliers paying for what you have used, rather than by a fixed monthly amount. Use Which? Switch for example and under “payments” choose “Direct Debit” and then “Monthly variable” or “Quarterly variable”. The lowest tariffs offered were comparable with fixed monthly. At least it worked for my part of the world. ” 🙂

I did reply: “Thanks Malcolm. I assure you I have done this periodically and the fixed monthly direct debit has always worked out cheaper.”

wavechange, my comment was intended to point out that there are options to pay for exactly what you use so others are not under the impression that such options don’t exist.

I think I should also qualify my comments in respect of payment by cheque. I suggest this facility should only be available at what I called the ‘reference price’ if payment is made within [say] 21 days [which allows for holiday absences, etc].

BT’s landline tariffs require payment of the line rental for a forward period so they are always in credit on that element. Energy suppliers would probably like to do the same for standing charges if they could.

“Is it fair that these deals are only available to internet-savvy consumers?”. it is worth remembering that having internet access comes at a cost – you pay for broadband and you pay for your computer. So if you just want to buy the essentials, and don’t want or can’t deal with the internet then it may well be cheaper to deal off line.

This conversation seems to be covering two separate issues – billing method and payment method. The two are independent.

Billing method
For environmental reasons, there should be a financial disincentive to unnecessary printing, and that disincentive should not fall upon the business or other customers, but specifically on the customers who request the printing. I don’t see why companies should be absorbing the cost of printing and posting bills or statements, as these costs would be unreasonably subsidised by customers who do not wish to receive paper bills. In many countries, banks charge postage to send paper statements. I would support UK banks doing the same, as I don’t see why I should subsidise these customers.

Payment method
Fees in respect of the use of a given means of payment have been limited by the Consumer Rights (Payment Surcharges) Regulations 2012 to the cost borne by the trader for the use of that means. Therefore if it costs nothing for an energy supplier to receive a bank transfer, then it cannot charge a higher price for the energy supplied. Why isn’t Which doing something about this breach of the legislation? On the other hand, payment by cheque should be surcharged, but not by a percentage or a higher price for the service (e.g. energy), only by a fixed amount in respect of the processing costs, because the cost of processing a cheque is the same irrespective of the amount.

On payment method it is advantageous for a company to have the certainty of a direct debit payment made at a specific time and paid automatically. There will be some extra administration in processing manual payments – whether cheques or transfers – and chasing late or non-payers.

According to BIS’s guidance at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/175298/13-719-guidance-on-the-consumer-protection-payment-surcharges-regulations-2012.pdf indirect costs cannot be included in any surcharge. Indirect costs would include costs of chasing late or non-payers.

I can appreciate that the collection of income paid by cheque is more costly than collecting it via direct debits. DD’s cut out a whole layer of clerical work at the supplier’s end and at the bank. My fear is though that the estimation of the extra cost is largely guesswork. While the punctuality, security, and reliability of payments are major advantages from moving people onto direct debits I don’t see why the financial benefits of this should only be afforded to people who use that facility and not be extended to all customers who pay the right amount at the right time. There are lots of people who will never be able to pay by direct debit but I don’t think they should be excessively surcharged in order to pay essential utility bills [so long as they conduct their account properly]. I think utility companies have a social obligation that goes beyond strict accountancy-driven commercial behaviour.

We all have a social obligation to pay our debts on time as well, don’t we? If it costs the supplier money (admin time, postage for example) to chase up late or non-payers then perhaps the best way is to charge just those individuals, as other organisations do (banks and overdrafts for example). Certainly the reliable payers should not be penalised;

I once met someone who made a point of not paying their utility bills until the reminder arrived. I was appalled by their irresponsibility, but I learned that this behaviour is not uncommon. On the other hand, I know that the energy companies are required by law to negotiate with customers who are in debt and cutting off the service is to be avoided if at all possible.

I do support charging those who behave irresponsibly for the extra costs they incur, but I also support current measures to help those who are struggling with debt.

Well I certainly agree with that Malcolm. It would be wrong to generalise that people who do not pay by direct debit are necessarily late with their payments, in fact most customers are probably very diligent. There are processes within society for helping people who are in financial difficulty and it is no part of the energy suppliers’ role to give relief in those circumstances. There are also those who are in no financial difficulty but are delinquent in their payments; I personally see no reason why a reasonable daily surcharge cannot be applied to late payments [after, say, 21 days] and added to the account just as credit card accounts are administered. I trust that would be consistent with the BIS advice that NFH has quoted above.

I would support a surcharge for late payments due to carelessness. I once came back from a long holiday to a red utility bill, which is one reason I have moved all my regular outgoings including credit card bills to direct debit.

My understanding is that, at present, it is the responsibility of the energy companies to deal with those who are in financial difficulty. They can be transferred to a prepayment meter but I’m not aware of surcharges. The universal suggestion is that those who are in financial difficulties should notify companies promptly but in practice this does not always happen.

I have not heard of any surcharges being applied to customers’ accounts for late payment. I expect no company wants to be the first to go down that road – or perhaps the Regulator has warned them against such a move. If such a tariff structure were to be introduced I would hope the late payment surcharge would not be backdated to the date of the bill [like the way credit card interest is retrospective to the date of the transaction] but only to the date by which payment should have been made. I presume that at the moment if there is no response to the escalating final reminders and warning notices the debt is placed in the hands of debt collectors who can ultimately get a court order. I believe that when people inform their suppliers that they are in financial difficulties the energy companies try to come to an arrangement with them to pay by instalments and offer advice on how to economise; this is frequently brokered through the Citizen’s Advice Bureau.

The trouble with putting people on prepayment meters is that it only adds to their financial problems as the tariff is generally higher than a normal tariff. However, it is a last resort and it is difficult to see what other options could be offered in those circumstances. I am sure the energy companies do try hard to help people with large debts but there is a limit to how far they can go.

It looks likely that the smart meter roll out will happen, despite concerns about the cost to consumers and other objections. Presumably it would then not be necessary to charge consumers more if they have a prepay meter provided that they have cleared their debt.

It would be possible to configure smart meters to display the amount currently owing according to the selected tariff. Such a meter might be more helpful to people as they see the pennies ticking up.

Hiding the smart meter under the stairs doesn’t exactly contribute to consumer engagement.

I don’t know what we will have inflicted on us but a friend showed me his neat portable display unit, operated via a wireless connection. Before that was fitted he was getting 44p per unit under the feed-in tariff and his meter was running backwards when the sun shone.