Credit in energy account- leave it there or withdraw?

[Thursdayafternoon]

Background: A decade ago, we got into trouble with our energy bill. We simply weren’t billed and were young and didn’t have a clue we were missing a bill so never chased it. When we went to move house, we were hot with a bill of around £4k that was a big shock. For this reason, I’ve always been paranoid about my bill.

Current situation: We are with OVO and have built up £1600 in credit. Our monthly payments are £300. Now it’s summer, we are using around £230 a month (it was close to £400 in the winter) so the credit balance will rise.

OVO pay 5% interest in credit balances. This is more than my bank.

We are doing ok financially compared to most. We go down to £0 each month. We have made a lot of cut backs recently with the COL crisis. We are concerned about what we will do when our current mortgage deal ends (in 18months) and won’t be able to manage.

£1600 is a lot to have sitting in my OVO account. I’m slightly concerned about the company going bust. If I withdraw it I will put it into a savings account (I am good with money so no fear of ‘accidentally’ spending it).

WWYD:

a) leave it where it is
b) withdraw most and stick it in a savings account (I think my Marcus account earns around 3.2% interest)
c) withdraw £1000 and keep the remaining £600 in the OVO account.
d) something else

I would go with (c). Energy prices are starting to fall, so you don't need to keep such a big surplus in the account to protect you against the costs of winter. But you might as well hedge your bets.

I've never thought about it but as the pay interest, are OVO in some way classed as a financial institution? Just wondering if you might be covered by the deposit protection guarantee in the event of them going bust.

Thank you.

yes, I’m leaning towards c. I don’t know much about money so not sure about protection etc.

I’m not sure if there is anything I’ve not thought of so checking out other peoples opinions to help me decide.

I also would go with (c). You have too much credit with them to leave there, but you do not want to withdraw all of it as you need a buffer for when the government cap expires in June and again went next winter comes.

I'll add some links in the morning but OVO only pay interest on balances up to £1000 in any case. So £600 isn't earning anything.

When the government cap expires in June prices are going to go down so I think £1,600 is far too much to have in credit.

If they go bust, and this is always possible, your credit balance would be protected but it might be hard to access it for a few weeks whilst you are transferred to your new supplier.

I would withdraw it.

I didn’t know this. Thank you.

When the government cap expires in June prices are going to go down
Martin Lewis was saying that when the cap expires the unit prices are predicted to go down 15-20% from Jun-Oct and then rise back to what they were this past winter by Jan.

However, he said that the standing charges are not going down at all, so was warning that the price drop (when we don’t really use heat) is not going to really make a difference to our bills. So I am thinking OP’s £300/mo usage last winter will be about the same this coming winter.

(If I am recalling Martin Lewis somewhat correctly and haven’t garbled it up.)

If they go bust, you won't lose your credit, it's protected. One of the reasons that the standing charges have gone up so much is that it includes a levy to pay for the costs of all the small suppliers that went bust a couple of years ago.

However, if they only pay interest up to £1000, there's no point having more than that amount in there.

I'd normally say to take it all back at this time of year, as recently advised by Martin Lewis because its the mid point between high winter bills and low summer bills, so if your DD is set correctly, you should be at zero now.

However, if you get it back at any time and have a small financial advantage by leaving £1k (or just under) in there, I'd probably do that. If you took half of it back, you'd have £800 earning 5%, instead of 3.82% which is the current highest instant access rate with Chip, so less than a tenner a year profit. I think I'd ask for it all back, and also review the DD amount, as it seems strange that you've built up so much from the numbers you've posted. Could you have reduced your usage, in an attempt to mitigate the effect of the price rises?

I've only left about £300 credit in my energy account - I don't want someone else sitting on my money. Take it all out and leave a smaller balance.

I would probably take half of it out, then you get the interest if you don't particularly need the money. It depends really how they use the credit, I'm with British Gas and can get a lot in credit, about £1k because they withdraw the money at bill time so if I look just before a bill is due, credit is very high but will go on the bill

Martin Lewis actually said to remove credit if it was over a certain amount.
We had £800 in ours and are with Octopus after being shunted from Bulb. Put it towards our car being replaced and bought a far nicer newer one than we would've bought by selling our old one.
Very simple.
We just kept £200 in there

Yes, he did and I agree that £1600 when your winter usage is £300 is way too high a credit to carry forward! £600 is more reasonable to leave, that’s why option c is my favourite ;)

I think Martin Lewis takes about this on his pod cast last week. He said to do a meter reading to mark sure everything is up to date. At this time of year he said you should have an extra months credit on your account.
I would do option c

I agree keeping some credit there is wise especially as you are getting interest (never heard of this) but £1.6k is a tad too much. With the way energy costs have been we have built up credit of £1k but would not exceed this.

I would be wondering about what looks (to me at least) to be your high energy costs and therefore consumption.
If you are using £230/m now then what is causing this? We weren't spending that much in the winter and it is now back below £100/m (modern 4-bed det) so what is causing yours?

Just to confirm the interest rates and maximum balance - here's the page from Ovo, it's right down at the bottom.

The guarantee I was thinking off was the Financial Services Compensation Scheme. This protects savings of up to £85,000 in one financial institution, in the event of it going bust.

a) Leave it in there earning interest and lower your monthly direct debit. You can always change your mind if something comes up but until then you'll have a little more money each month and you're earning higher interest on the money than you'd get if you withdraw it.

Just seen that they only pay interest on the first £1000 so withdraw £600 and lower your direct debit amount.

Thank you. This is very useful.

I would Withdraw the £1000 and pay it off your mortgage.

This is actually a very good idea, thank you.