Customers of telephone companies who pay their bills by cash or cheque are being penalised to the tune of £237 million a year, according to research from a comparison website. Home phone customers not paying by direct debit and receiving paper bills being hit hardest.

Last May, BT introduced an £18 a year penalty for the 2.9 million customers paying their phone bill by cash, cheque, debit or credit card. In addition, from April this year, 9.4 million customers receiving paper bills will pay £15 a year more than those receiving bills electronically.

A new study by uSwitch.com reveals that paper bills cost 13 million consumers at least £162 million a year in lost savings.

BT customers could save £141 million a year by signing up to paperless billing and a further £52 million paying by direct debit; Virgin Media customers could save £21 million a year by opting for electronic bills and a further £22 million (£60 each) by paying through direct debit.
Yet major companies like Pipex and TalkTalk do not give customers a choice: they have to pay by direct debit.

In May 2007, BT announced an £18 annual charge for any customer paying by cash, cheque, credit or debit card. Nearly a year on, 1 in 5 of its customers (18%) – almost 3 million – are still opting to pay by a method other than direct debit, bringing in an additional £52 million for the company. In similar fashion, 1 in 10 Virgin Media customers (9%) – some 400,000 – are prepared to spend £60 a year to avoid paying by direct debit, resulting in a further £22 million going down the drain. In total uSwitch estimates that 3.4 million consumers opt against paying by direct debit in the UK, wasting £75 million.

Households is opting to receive a home phone bill through the post rather than electronically – lose  savings of £162 million. From April, 6 out of 10 BT customers (59%) will pay £15 a year more to receive a paper bill at a collective cost of £141 million. Tiscali-owned Toucan also charges a £12 annual fee for customers requesting a paper bill, while Virgin Media offers customers who receive electronic bills a £6 a year e-billing discount. With 84% of Virgin Media customers currently receiving a paper bill – some 3.4 million – a further £21 million could be saved.

Steve Weller, Head of Communications Services, at uSwitch.com comments: “Some would argue that the additional charges imposed on customers not wishing to pay by direct debit are an unfair penalty. However, some companies, such as Pipex and TalkTalk, do not even give customers the luxury of having a choice – it’s direct debit or direct debit.

“With charges as high as £60 a year, customers should seriously consider whether they wish to continue settling their bills by cash, cheque or card. If they do, they could still cut costs by moving to a company that offers cheaper line rental – Toucan’s £8.99 a month line rental (plus £2 non-direct debit fee) is £27 a year cheaper than BT and £60 a year cheaper than Virgin Media.

“It would be interesting to see whether the costs incurred by the companies for providing paper billing are proportionate to the excessive charges being levied on customers. While there are clear environmental benefits to receiving bills electronically, only half of the UK has broadband at home and those that don’t are likely to rely on the postal service to receive their bills. Our advice to the 13 million customers being stung by these fees is to compare prices among all the providers to find the best deal for their needs – some companies will still post bills for free.” 

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