Octopus Energy Interest Charges

[yieldhog]

I signed up with M&S Energy several years ago and transitioned to Octopus a few years back. I've always found it's website easy to use and informative and I've never been inclined to keep shopping around for the best deal. It's just too much hasle to keep changing energy supplier unless you are very unhappy with your current supplier, for whatever reason.

However, one thing I've noticed that I find slightly irritating is the way they encourage customers to even out their bills by using the Octopus forecasting tool to pay a fixed rate each month that will keep the account in good standing by avoiding large deficits and large surpluses.

This is all very well and good and sounds sensible, but by running a deficit in the winter the account will incur interest on the deficit balance. in the summer the accousnt will go back in to surplus but no interest is paid on the funds that are in excess over the summer.

In the scheme of things it's not a big issue for me personally but over hundred or even thousands of accounts that's a fair sum of free money for Octopus to earn some extra profit. I did check how much interest was being charged by Octopus and eventually found the rates they were charging, but it was not very transparent.

I suppose it's not too different to banks getting free money from their current accounts but at least they are transparent about it and customers have plenty of access to alternative banking arrangements.

Y

[DrFfybes]

Do they charge interest on a debit balance? I'm in debit at the moment by £31 or so as my debit goes out in 10 days, I was a couple of times last year, but I've never seen an interest charge on my bill.

I know they charge interest on a debit due to a missed payment, but I'm pretty sure if you meet the payment schedule there is no interest if your balance is negative.

Paul

[londoninvestor]

Although they're not very transparent about this either, on request Octopus will put you on a variable direct debit plan where they only take exactly what you owe each month. That avoids giving them an interest-free loan in the summer.

[swill453]

I'm with Octopus and pay my variable monthly bills by direct debit. I can't say they try very hard to make me change to a fixed monthly amount.

This has been the case both on their standard tariff and my current fixed tariff.

(I also wasn't aware they charged interest on a debit balance. Are you sure?)

Scott.

[swill453]

(I also wasn't aware they charged interest on a debit balance. Are you sure?)

In fact I'll go as far as to say the OP is wrong. They simply don't.

(I'm sure you could find an Octopus "interest rate" if you looked hard enough, but that's not used for accounts simply in deficit because of fixed monthly DDs.)

Scott.

[yieldhog]

(I also wasn't aware they charged interest on a debit balance. Are you sure?)

In fact I'll go as far as to say the OP is wrong. They simply don't.

(I'm sure you could find an Octopus "interest rate" if you looked hard enough, but that's not used for accounts simply in deficit because of fixed monthly DDs.)

Scott.

Maybe I looked too hard to find "interest rate".

I looked again and this is probably what I found:

"Octopus Energy charges interest at a rate of 4% above the Bank of England Bank base rate on outstanding charges from the date they become overdue until payment is made.
Here's a more detailed explanation:
Interest on Overdue Charges:
If you have an outstanding balance on your Octopus Energy account, they will charge interest on the overdue amount.
Interest Rate:
The interest rate is calculated as 4% above the current Bank of England Bank base rate.
When Interest Starts:
Interest will start accruing from the date the charges first became overdue until the date you make payment.
Other Penalties:
Besides interest, Octopus Energy may also charge a fee for the first missed payment (£15) and £20 for each missed payment after that.
Debt Collection:
They may take steps to recover outstanding sums, which could include employing a debt collection agency.
Help when you're struggling to pay - Octopus Energy
27 Feb 2025 — We've consistently been the only large energy supplier to always charge below the price cap. We have long been vocal ab...

Octopus Energy
Co-op Energy, Flow Energy, GB Energy | T&Cs - Octopus Energy
This will be the highest value incentive of those for which you qualify. 10. Non-payment of charges - We may charge you £15 for th...

Octopus Energy
Generative AI is experimental."

I accept that this may only apply to customers who are in deficit after payment has been requested several times.
I must admit that I was not aware that I could pay the exact amount each month by direct debit.
I've been on fixed tariffs for a couple of years and usually try to avoid going into deficit, so I don't have any bills to check whether or not interest is charged.

Probably not something to be concerned about but it would be good if Octopus made it clearer on it's customer log-in account information. I went through all the Terms and Conditions on it's customer log-in site and could not find any mention of the circumstances when interest would be charged.

Thanks for all your responses.

[DrFfybes]

Maybe I looked too hard to find "interest rate".

I looked again and this is probably what I found:

"Octopus Energy charges interest at a rate of 4% above the Bank of England Bank base rate on outstanding charges from the date they become overdue until payment is made.
Here's a more detailed explanation:
Interest on Overdue Charges:
If you have an outstanding balance on your Octopus Energy account, they will charge interest on the overdue amount.

As you have now realised, the key word is "overdue".

Pay on time, no problem

Paul

[SteelCamel]

Yes, if you pay by fixed direct debit then you don't have an "outstanding balance" even if your account is in deficit as it's not due yet. It only becomes "outstanding" if you fail to pay the agreed monthly amount. Of course if it goes too far into deficit they will insist on increasing the payment, though it's surprising sometimes how far suppliers will let it go.