Ways to use your DD Energy Refunds
I am sure you are one of the millions of consumers who diligently overpay their energy bills on regular basis. Utility companies, to make payments easier, started the practice of collecting payments through direct debits and still deduct more than what you actually owe them.
The amount of direct debits is often based upon your average historical usage however; the actual consumption, in money terms, can be lower than what is actually deducted from your account.
If your bill is less than what you actually paid, your company owes you excess amount and keeps that amount as credit in your account.
Unfortunately, you never got that money refunded and to rub more salt on your wounds, energy companies used to make more than £300 Million in interest alone from the excess money paid by consumers like you.
However, this is no longer the case now.
Under new rules, 5 of the big 6 energy companies in the country have actually agreed to refund excess amount paid by their customers. This amount can either be paid to you automatically at your annual re-assessment or you can request that amount anytime you want.
Though you can request this refund anytime you want, subject to latest meter readings however, popular media is considering this refund money as windfall.
And you know what we do with money received as a windfall?
We blow it away on beers, drinks, gifts and eating out.
There is a very odd concept in personal finance called mental accounting. Simply put, it says we value each pound we receive/earn differently.
For us, money received in bonuses and refunds have different meaning and value than money we earn through our salaries.
It is due to this inherent weakness that we often end up wasting our refunds and bonuses.
If you want to put your direct debit energy refunds to their best use, here is the list of five ways you can use that money wisely:
When your monthly tax deductions are highest
You must have noticed that your income tax deductions vary each month. This difference can be as large as £100 or more. If you know how your tax deductions vary from month to month, best time to ask for that refund is when your monthly tax deductions are at their highest.
If your tax deductions are larger for any particular month, your disposable income will be lower so to fill that gap, it is better to ask for refund rather than using your credit card to make ends meet during that month.
During Christmas festive season
Winter is the time when both your energy bills and other expenses increase. The festive season of Christmas is one such time in the year when, on average, £868 is spent.
It is also the time when energy bills are at their maximum.
If you have already budgeted for extra energy costs during the winter, it is better to ask for refund just before Christmas time and partially fund your shopping spree without actually borrowing more.
At the time of renewing your car insurance
If you find yourself short of money at the time of renewing your auto insurance, asking for a refund at this time can be your best option rather than asking for a credit from Insurance company.
Latest insurance figures for the first quarter of 2014 indicate that annual insurance premium for 23 years old is £1000 and gradually falls with age so if you are £200 in credit with your energy company, you can easily pay at least 2 months of insurance premium in advance.
Haggle properly and you may get a small reduction in your premium for this little advance.
Just before the announcement of dividends
This one may not be for everyone but if you play it right, you can earn few bucks on your refund. If you know a bit about stocks and can find out at what times of the year, companies announce their dividends, you can easily use your refund to buy such stocks.
You can earn few quid as dividends from your little investment though the amount may not be large.
Making right choices with your money is the key to achieve financial freedom. If you are in credit with your energy company, perfecting your timing to receive your refund shall be your priority.
About The Author – Adnan Manzoor
Adnan is a personal finance blogger and offers free tips & advice on making right money decisions on his blog: The Simple Quid.