5 Things You Should Know About Budget Billing for Your Utilities

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Many utility companies are now offering the benefit of budget billing. This basically means that you pay a set amount each month for the bill. Generally, the power or gas company offers these services. The company will look at the amount you spent last year and then add a percentage to it, to cover the cost of inflation and divide the amount over 12 months. While this may seem to be a great idea, you need to carefully consider several things before you sign up.

Some plans are great and some are another way for the company to charge you more money.

1. Find Out What Happens If the Company Estimates Incorrectly

Take a look at whether or not you will owe them money if you use more power than they planned. This is fine, but generally, the companies will not refund you the money if you use less power than they planned. Additionally, you may need to set aside extra money to cover the cost in December. This means you may end up paying more than you planned or used. The budget billing terms are usually in favor of the company and not the consumer. This is the biggest drawback when it comes to considering a budget billing plan. 

2. Look at the Monthly Fees

Examine all administration fees associated with the service. Many will charge a monthly fee. The fees can vary from company to company, but anything more than two or three dollars a month is too much money for the service.

All the company is doing is averaging out your yearly electric payment. This is not something that should require a high monthly fee. Many people will sign up for budget billing over the phone, and so it is important to ask about this fee. You should also read the fine print when you receive the agreement.

3. Carefully Read Your Contract

Consider the contract that you are signing. When you do this you are signing up for at least a year. There may be complications if you have to move. You should look carefully at the expectations on this. For example, you may need to pay extra when you move if you have used more power than you have already paid for. If this is the case, you may need to set extra money aside or dip into your emergency fund to cover the difference.

4. Create Your Own Budget Billing System

Think about doing this yourself, without the charge, the contract, and the hassle. You can even budget the amount they suggested. Then roll over the additional amount from the lower months to cover the months where you use more power. This will help you to budget without spending money on administration fees. You can do this with any category where the amount you spend each month fluctuates. You can either divide the amount you spent over the last year by 12 or budget the highest amount you spent last year for each month and then put the extra money into savings or towards your debt payment plan.

5. Make Your Decision Carefully and Monitor Your Bill

It is important that you fully understand what you are signing up for.

There are advantages to knowing exactly what you will be paying each month. It may be worth the added expense for you. If you are worried about the cost of your utility bills, you can work to lower them. If you do sign up for budget billing, you may be tempted to simply pay your bill each month and stop worrying about this expense. However, that may end up with you using too much power and being hit by a large bill. You need to monitor your power usage throughout the year to make sure that you are within your the estimated power usage, especially as you begin to reach the end of your contract.