Understanding Energy Interest Rates | comparethemarket.com

Understanding Energy Interest Rates

Let’s be honest, how many of us actually read the T&Cs of our utilities supplier? It’s often just a quick case of skim-reading and ticking a box, right?

Well, when it comes to your energy bills, you could potentially be ignoring important information regarding late or missed payment penalties. In fact, we’ve done some research and found that over two thirds of consumers (67%) aren’t even aware that energy companies charge interest on their bill if they miss a payment.

We’ve broken down some of the key information to look out for when it comes to late payment charges and interest rates, helping you to avoid any unwanted surprises.   

Energy T&Cs Fact 1

So what are energy interest rates?

Just like loans, an energy company may charge interest if a payment hasn’t been made within a certain timeframe. So when you get your monthly or annual energy bill, there will usually be a period of around 14 to 28 days (depending on the provider) in which to make payment; otherwise an additional percentage of the cost could be taken on top.

But even if you understand all about interest rates, do you know how much yours actually is? Our research shows that 69% of consumers have no idea how much they could be charged if they make a late payment.

On average, energy providers are charging an interest of up to 8% APR to late-paying customers. Now we know that 4% may seem like a small number, but if your annual energy bill is relatively high, this could add up to quite a significant amount. Not ideal, especially when considering that nearly one in ten (9%) of households have missed an energy payment at some point. 

How to be bill-savvy and avoid penalties

Tip 1: Our first piece of advice would be – you guessed it! – to really read the T&Cs. Yes, we know they’re dull and you’d much rather be doing something else, but it’s the only way to truly know what you’re signing up for. The average T&Cs of an energy provider are 8,130 words and 14 pages long – a document which takes nearly half an hour to read! But making sure you’ve had a proper sift through with a cup of tea and the TV on in the background could prevent you from being caught out, and most importantly, save you money.

Tip 2: If you’re a little on the disorganised side, why not consider setting up a direct debit? Nearly a quarter of households (24%) pay their energy bills via other methods, such as online payment, prepayment meter, the bank, or phone; but setting up a direct debit means you don’t even have to think about it - the money will just leave your account on the same day each month!

How the major energy companies stack up:

Tackling those T&Cs

So whether you’re a ‘pay your bills once the final notice has come through’ kind of person, or you can’t stand being even a day late, it’s always worth reading the T&Cs of your supplier; just to make sure you’re fully aware and comfortable with everything.

It may not be the most exciting read you’ve ever had, but it will definitely be worth it to be completely secure you’ve covered everything.

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