Is It Wise to Cancel Your Auto-debit While Being Unable to Pay Bills?
As the revised electricity prices came into effect on 1 October 2022, the Irish has seen their bills rise by 26.7%. While the energy bills have already gone through the roof, a further rise in prices is a turn of the screw.
Now people are struggling to meet their ends. The current help with energy bills and cost of living benefits to the unemployed does not seem to be nearly enough to cover their expenses. Further, most of the government help is just a one-off. On the other hand, there needs to be more clarity about a price drop.
A large number of people are feeling a pinch, pushing them to the edge of a debt cycle. As far as it is about dealing with sky-rocketing prices, you may be desperate to turn off appliances, disconnect the meter yourself for a while and cancel the auto-debit payment. Unfortunately, all of these solutions are far from easy.
To cut back on your energy usage means asking for physical problems and an open invitation to medical bills. For all self-disconnecting, standing changes will stay active on your account. Canceling an auto-debit system is sillier.
Why should you not cancel your auto-debit?
Do not follow the advice that you should cancel your auto-debit if you are unable to pay electricity bills. This will take a toll on your finances otherwise. Here is why you should not cancel your direct debit.
You will end up being charged fees when you make a default. However, the problem is not that small. If you pay your energy bills with direct debit, you will find it cheaper than the bills you encounter when a supplier sends them to you on paper.
It has been estimated that you may end up paying more than 6% quarterly on electricity and gas if you cancel the direct debit.
You will lose your credit points
Energy suppliers inform credit reference agencies – Experian, Equifax and TransUnion – of your payments. If you make a default, it will have the same impact on your credit report as a missed payment or default on a loan does.
However, cancelling a direct debit mode should not harm your credit score as long as you can pay off the bill on time. Some people think that you can escape running your credit points if you make a complaint at the same time as cancelling the direct debit.
Well, it is true that the complaint is properly verified, and no energy supplier can take it to credit reference agencies if the dispute is valid. However, if you think you can prevent your score by saying you cannot afford payments because of rising costs, you are mistaken.
High energy prices are not seen as a valid reason for not reporting your default to credit bureaus.
You may end up with a prepayment meter
If you miss a repayment, your energy supplier will ask you to have a prepayment meter installed. You will not just be paying your ongoing bills but make extra payments towards arrears.
Prepayment meters are not a good idea. The fact is that they will make it harder for you to get by. Though the supplier will take into account your financial situation to decide the arrears payment, the problem is that you are already unable to pay off ongoing bills, let alone pay arrears.
If you have fallen behind on your payments, you should immediately start making arrangements to pay them. Your supplier will inform you in advance that they are going to install a prepayment meter. However, it happens only when you still struggle to pay off arrears.
Note that you cannot deny them installing the prepayment meter once they have reached your premises. No promises will stop them from doing so. In fact, they can have orders to do so from the magistrates.
If you already have a smart meter installed, it can immediately be switched to a prepayment meter remotely. Before doing so, a supplier will inform you about it and discuss your financial situation. However, some people have found that it is switched even before such checks are carried out.
Do not forget that the prepayment meter will be more expensive. In fact, you will be restricted from using energy units.
How can you avoid prepayment meters?
Because these meters can kill your budget, you should try your best to avoid them. If you have a small amount of arrears, you can settle them with quick money loans. Small funding sources can quickly supply an injection of cash.
However, make sure you borrow money from a lender that allows weekly payments. It is somewhat more manageable than paying off a lump sum. In addition, you should take the following steps:
Reduce your energy usage
You cannot afford to be in a colder room when the weather is cold. Even a physically fit person can fall ill, let alone those with breathing, heart and joint problems. You can reduce energy by putting your appliances off standby mode.
If you have a boiler, make sure you have fixed the default setting. When you have control of a boiler, you will likely be able to save money. This will free up some money for emergencies, so you will be able to avoid unsecured personal loans in Ireland every time.
Pay what you can each month
You should avoid completely ignoring the payment of your energy bills. If you do so, your arrears will quickly add up. As a result, the chances of prepayment meter installation will go up. You should keep making a minimum payment.
Though arrears will still add up, they will be slower. Further, your supplier will also see that you are trying your best to keep up with payments.
If you are unable to pay your energy bills, you should not cancel auto-debit. If you do so, your supplier will install a prepayment meter, and it will cost you much more money. You should find ways to reduce energy bills and avoid installing these meters.