Money Saving Expert founder Martin Lewis has given advice on how people can find the cheapest way of paying for their energy bills. The financial guru has been busy over the past week following Ofgem's announcement that the energy price cap would shoot up by just over 80% from £1,971 to £3,549 on October 1.
The announcement has shocked households across Britain as people try to figure out how they will afford their bills during the winter months as the cost of living crisis continues. Mr Lewis has himself said he fears people will die because they cannot afford to keep their homes warm over winter.
In his latest email sent this morning (August 31), Mr Lewis spoke about the upcoming price rises and what it means in general for households. His advice included which method out of direct debit, prepayment or receipt of bills is the cheapest way of paying.
Read more: Eight million homes will qualify for Winter Fuel Payment
In his email, Mr Lewis said: "Direct debit is still the cheapest way to pay. I've seen much confusion about this on social media, so I want to clear it up.
"The price cap depends on the payment method. Here are the new average price cap rates for someone ON TYPICAL USE:
- Direct debit: Up 80% from £1,971 to £3,549/yr
- Prepayment: Up 79% from £2,017 to £3,608/yr
- On receipt of bills: Up 79% from £2,100 to £3,764/yr
"So the prepay cap is 2% more than direct debit, receipt of bills 6% more (it can vary by firm - we're going to do some work on that). Ditching direct debit may help with your cash flow if your direct debit is set too high (try to get them to lower it - see your direct debit rights), but it's important to understand that in the long run you'll pay more, whereas if you overpay while on direct debit you're eventually due that money back."
He also addressed questions around trying to find a fixed rate with energy suppliers. Mr Lewis said: "I never thought I'd write this... at the moment the predictions are, on average, over the next year, that the price cap will be roughly 145% more than it is now (i.e., two and a half times). So if you can find a fix at less than that, it may be worth it.
"There is a lot of crystal ball gazing in this, so we can never be, and have never promised to be, right, but see my Should I fix and what are the best fixes? guide for our latest info.
"PS: The MSE team have updated the numbers for me. I wasn't due back to work this week, but felt writing this bit of the email was so important I needed to do it myself. They've kindly done the guides though."
He also urged people to start putting aside a bit of extra cash now if possible to help pay the costs of energy and other bills in future months. "This will be a pipe dream for many," Mr Lewis wrote.
"Yet for those who do have savings or currently spend less than you earn, putting some aside or even, unbelievably, asking for your energy direct debit to rise should ease the winter cash-flow pain."
You can see how much your energy bills will go up by using the calculator below:
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