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Advanced payment energy plans

Advanced payment energy plans

Advanced payment plans offer you the chance to pay for your energy upfront in return for discounts, but are they worth considering?

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When it comes to paying for your gas and electricity, there are almost as many options as plans. How can you choose between Direct Debit, pay on receipt, or advanced payments?

As is so often the case, it all depends on your personal circumstances. But there are a few rules you can follow to see if advanced payment plans are worth considering.

What is Advanced Payment?

An advanced payment plan is a relatively rare way of paying for your gas, electricity or both, and is only offered by a few energy providers.

Advanced payment plans require that you pay for your energy up front in return for a discount of typically around 5% in comparison to standard Direct Debit prices.

Advanced payment therefore offers you a discount guarantee relative to the standard rates, but if your supplier puts their prices up your prices will go up too, unlike fixed plans.

advanced payment energy plans

What are the advantages of Advanced Payment?

The most obvious attraction of advance payment schemes is the financial incentive. A fixed discount means not only a saving now, but can mean a guarantee that your prices will remain lower than the standard rate, even if your supplier puts their prices up.

Advanced payment schemes can also prove attractive to careful budgeters who want to allocate money for specific tasks to avoid debt. Paying for your energy upfront means you know that it is taken care of, so you can focus the rest of your income elsewhere.

Finally, with interest rates low ,the potential returns from keeping money in savings are relatively low, so getting a discount for paying in advance can be a good way to make your money work harder.

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What should I look out for?

While the discount offered by advanced payment schemes can seem attractive, there are a number of things to be aware of.

Firstly, the discount you will be offered is based on the standard rates of your supplier. There is however no guarantee that your supplier offers the cheapest rates in your area.

Even if your supplier is the cheapest in your area, there is no guarantee that the advanced payment plan will be cheaper than other plans, like online saver plans. To be sure, you should always run an energy comparison first.

Secondly, being on an advanced payment plan can also inhibit you from switching to a cheaper plan should one become available. You should always make sure that your supplier will reimburse you with any outstanding credit should you switch away.

Thirdly, your annual rate will be estimated, most likely based on your existing usage information. That means that if you reduce your usage in comparison to previous years, you won’t see the advantages in your bill.

It is also worth noting when your plan runs out you will be reverted to your supplier’s standard plan, which will almost certainly be more expensive.

Finally, your energy company is not a bank, and what money you give them is not protected. If your energy supplier is taken over or goes out of business you could lose some or all of your advanced payment.

What other payment options are there?

The most popular alternative payment option is monthly Direct Debit. A Direct Debit is simply you authorising your energy company to automatically collect payments from your bank, but these plans will typically offer you a small discount.

You can pay Direct Debit quarterly or monthly, but you can also secure a further discount by paying and managing your bills online, otherwise known as ‘paperless billing’.

You can also make a sizeable saving by combining your gas and electricity on the same tariff. So-called ‘dual-fuel’ tariffs often offer you a substantial discount, especially if you also pay online and by Direct Debit.

Finally, if you think energy suppliers will put their prices up in future, fixed plans offer you the option of paying slightly more for your energy, but with the security that your payments will stay the same for the duration of the plan.

Most suppliers will still let you pay by cash or cheque, but you should be aware that you will pay more for this.

If you have a prepayment meter you will need to pre-load the top-up card with credit, which can be done at a local PayPoint of PayZone, or at the Post Office.

How else can you make the most of your money?

Although advanced payment plans don’t always offer the best value for money, they may offer peace of mind, particularly when savings rates are so low.

However, rather than investing money in savings or your energy bills, why not invest it in energy saving measures instead?

Even small changes like replacing all your lightbulbs with energy-saving ones can offer significant savings, while installing sufficient insulation can save you hundreds of pounds a year.

You can also save money in the long run by producing your own energy and, in some cases, selling it back to the Naitonal Grid. Installing solar panels or wind turbines may have a significant upfront cost, but will pay for themselves over time.

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