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According to research by Age UK, the penalty charges for not switching to direct debit payments can add up to £60 on the average family phone bill and £180 for gas and electricity.
Many cash-strapped Brits are loathe to switch to direct debits as they worry they will have less control over their household outgoings, and more than seven million elderly people still prefer to pay by cheque.
Yet a growing number of phone and internet companies are refusing customers the best deals if they insist on traditional methods of payment - others simply refuse to allow cash or cheque payments.
Sky, for instance, no longer accepts cash or cheque payments from new customers, and Virgin Media charges consumers £5 a month to do so.
Meanwhile the majority of energy companies allow traditional payment methods... but those refusing to pay by direct debit lose out on the cheaper tariffs.
The firms insist that these discounts are on offer for direct debit users because it saves on cheque or cash handling costs, allowing them to pass the savings onto the consumer.
But some campaigners suggest it is unfair to penalise those who prefer to pay by cheque or cash.
Michelle Mitchell, director general at Age UK, told the Daily Mail: "The fact is that some people prefer to pay their bills with cash or cheque.
"This is often because they find it easier this way to control their outgoings and reduce the risk of overdrawing and paying bank charges.
"Firms must ensure that they continue to offer people a way of paying that suits their need and should not charge people over the odds for paying in a way that suits them."
What do you think? Should utility companies ditch such payments or is it fair given cash and cheque handling costs? Leave your comments below...