If you're signed up to a contract with a utility or telecoms provider, watch out for this big rip-off...
Here at lovemoney.com HQ, we regularly bang on about how careful you need to be when it comes to renewing your insurance policies. After all, when a letter arrives on your doormat to warn you that your home insurance is coming to an end and you need to renew, it can be far too easy to simply accept the new quote without bothering to shop around.
However, if you decide to do this, it’s very likely you won’t be getting the best deal on the market. In fact, many insurance companies only offer their best deals to new customers and will actually boost your premium in the second year, hoping you won’t get around to switching to a different insurer.
That’s why we frequently encourage you to spend a little time shopping around and using our comparison centres, such as this one for home insurance, to find a better deal before you renew. Yes, it might take a while, but it will be well worth it when you see how much you can save.
Unfortunately, however, when it comes to other important expenditure, such as your household bills, companies are coming up with more devious ways to make it harder to get out of your contract when it's coming to an end.
The great rollover rip-off
A recent report in the Telegraph revealed that energy and telecoms providers are automatically rolling customers onto new deals without consulting them.
Many people have signed up to deals that last for at least a year, and when those deals come to an end, you should expect to receive notice – preferably in writing.
Yet despite companies claiming they do inform their customers before they roll over contracts (to give you time to cancel the contract before it renews), in some cases, only emails are being sent out and these can easily get lost or classed as spam and end up in your junk folder, meaning you never see it. And if a letter is sent out, the terms and conditions of the contract are usually buried somewhere in the small print, making them easy to miss.
But it’s not only the fact that companies are being sneaky about telling their consumers when their deal is coming to an end that gets my goat, it’s the fact that if a consumer then chooses to opt out of the deal, they will find that it comes with a hefty penalty!
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The penalties
For example, if you are signed up with British Gas and have locked in to one of their fixed tariffs, you’ll be charged £35 for electricity and £35 for gas if you want to get out of your contract early, unless you cancel within the 28-day cooling off period.
So that means if you've automatically been rolled over onto a new contract and haven't spotted this in time, it can be very expensive to get out of.
Meanwhile, Scottish Power charges £30 for electricity and £20 for gas if you cancel your tariff.
Fees with BT depend on when you cancel your contract and what deal you’re on. For example, if you have the Unlimited Weekend Plan you’ll be charged £2.50 for each month you have left on your contract. So if you’ve been rolled over onto a new 12 month contract and you want to leave, you’ll have to cough up £30!
And if you’re on the Unlimited Anytime Plan you’ll be charged £5.50 for every month left on your contract – so 12 months would equal £66. Ouch! You can see the full list of charges here. The highest fee I found is for the BT Total Broadband Anywhere package which charges £30.25 each month!
What you can do
With information about termination fees often being buried in complicated small print or ending up in your junk email box, it’s really important to ensure you fully check any correspondence you receive from your energy or telecoms provider and give your junk email box a once-over every so often to ensure there’s nothing important in there.
What’s more, before you sign up to any kind of contract, you should ensure you know exactly what you’re signing up for. Check the terms and conditions carefully so you know when your contract comes to an end, whether it will automatically rollover, and what the penalties are for leaving early.
If it’s not clear in the terms and conditions, phone up and ask. It’s also a good idea to find out what your rights are in terms of cooling off periods. Generally, you’ll find you have a month to get out of your contract before any charges will be implemented.
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It’s really important to be clear about this to ensure you don’t get caught out. Unfortunately, websites for utility and telecoms providers can be incredibly hard to navigate around and details can be difficult to find.
If you’re signing up to a contract, it’s a good idea to set a reminder on your mobile phone or make a note in your diary to warn you when your contract is coming to an end. That way, if you don’t want to renew your contract, you can tell your supplier before they automatically renew your contract – and before you get charged.
Don’t forget that even if you’re in a long-term contract, you don’t have to stay locked into it forever. Providing you know when your deal is coming to an end, you can make sure you’ve done some research beforehand to find out whether it’s still offering you the best deal on the market. While fixing your energy tariff for a year can bring peace of mind, it’s important to remember that once that year is up, there may be a much better tariff out there for you.
So make sure you check out the lovemoney.com energy comparison tool to see whether there’s a better deal worth switching to. And if you’re looking for a better broadband or landline deal, take a look at Ditch BT and save £126 a year and Punish BT for increasing its landline charges.
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