When you have a prepayment meter, you are paying for your gas and electricity ahead of time by adding credit to the meter using a utility key or card. People with prepayment meters generally have to contend with some of the most expensive gas and electricity prices on the energy market.
Which is cheaper: prepayment or direct debit?
Whether prepayment or direct debit tariffs are cheaper is not as clear cut as it might seem at a glance. That is why it is better to break down the advantages of each kind of payment method for your energy savings:
- Energy utilities buy gas and electricity in advance. Customers on direct debit fixed tariffs with pre-arranged usage estimates generally get the best residential energy prices per unit because their providers can predict their energy needs easily.
- A Prepayment customer is more likely to have a higher energy bill. This is because companies cannot reliably anticipate the energy needs of customers on prepayment or variable rate tariffs.
- The simplicity of paying for the energy you need when you need it can be quite attractive. Prepayment meters allow you to do exactly that. You don’t need to worry about inaccurate estimates when you are on prepayment.
- Billing errors & metering discrepancies are all-too-normal for direct debit fixed tariffs.
- Standing charges and energy unit costs are lower when you are on a direct debit fixed tariff.
- With direct debit tariffs your electricity and gas are always on tap, making it easy to forget how much you are spending on energy. It is easy to forget how much you are using and end up spending more, even if you are on a cheaper rate.
- Prepayment meter tariffs encourage you to keep monitoring your energy usage. Even with cheaper unit rates and standing charges, direct debit tariffs are like credit cards for gas and electricity. They are not much help when you are trying to stick to a budget.
Steps to switching from a prepayment meter to direct debit energy billing
- Contact your energy provider and ask for a smart meter.
- Once the smart meter is installed, contact your energy provider again and request a switch to direct debit billing.
The switch takes generally around 21 days (including a cooling off period) but you may also need to have your meter changed, unless your home has a smart meter, in which case the switch over will be instant. If a new meter needs to be installed, you also need to be careful because, depending on the energy supplier, you might also have to pay for the replacement meter.
Generally, you can save money by having a standard meter and switching to a fixed tariff where you can pay for your energy by direct debit. However, before you can switch you need to make sure you will not be liable for any prepayment meter debt.
Why would someone switch to prepayment meter?
Prepayment meters have a bad reputation because many people associate them with fuel poverty and energy debt, as people run out of credit.
It is easy to end up spending more if you are on a cheaper rate. A fixed tariff is not an all-you-can-eat buffet. You may have seen stories in the press about people being saddled with hefty energy bills because of unscrupulous tenants or landlords.
To be fair, the prepayment meters themselves are rarely the cause of billing issues. Those are generally due to human error on the part of energy companies and customers. While prepayment meters may not be for everyone, there are some advantages to them as long as you stay informed.
Reasons to go for a prepayment meter
- To be more aware of how much gas and electricity you use
- To help you budget by paying for your energy usage in advance
- To avoid getting into serious debt or falling behind on energy bills
- To avoid being overcharged by energy providers with poor customer service
- To pay off energy debt without any interest on top
Why don’t many suppliers do prepayment meters & tariffs?Most independent energy suppliers do not offer prepayment tariffs. Utilita and Ovo Energy are the exception to this trend by offering convenient prepayment options online, by phone as well as with smartphone apps. The Big Six do offer prepayment meters but they do not actively seek to promote them. Since Smart Meters can be switched to prepayment and back again remotely, prepayment plans might become popular again in the next few years.
Prepayment meters for business
Many small businesses are interested in the simplicity of prepayment meters when it comes to staying on budget and managing cash flow as they grow.
Being able to control the cost of energy consumption up front is a very attractive proposition for many businesses, especially those starting out.
Seasonal businesses can avoid overpaying for gas and electricity in the off-season by switching to prepayment.
Prepayment meter debt
Here are the main reasons why you might have debt on your prepayment electricity or gas meter.
- If you’ve just moved in to a new home, the previous resident could have built up debt on the meter. To avoid potentially being liable for someone else’s debt, you need to to contact the energy company currently supplying the home and let them know you have just moved in.
- If you dipped into the emergency credit on a prepayment meter you will have built up daily standing charges for however long the emergency credit was in effect.
- Once you go into emergency credit on a prepayment meter, you have to top up to pay back the emergency credit as well as as a little more in order to stay in good standing moving forward.
- Your top up amounts have not been high enough to sufficiently cover both standing charges and your energy consumption. If this happens for long enough, those unpaid standing charges definitely start to build up.
- Your home was fitted with a prepayment meter so you could pay back energy debt according to an agreed payment plan. If this is the case, part of every prepayment top up will go towards lowering what you owe.
Be aware that if you owe money to your energy company, you might not be able to switch from prepayment to direct debit. However, if you owe less than £500 and have agreed on a payment plan to clear your debt, you should be able to switch without any problems.
Smart Prepayment (PAYG Meters)If your household has a smart meter, chances are that you can take advantage of this new technology and switch back and forth between a prepayment tariff and a direct debit tariff without needing to change meters. Smart metering allows you to see up to the minute energy consumption for your home. This gives you a greater degree of control over your energy usage. Give our energy experts a call on 01704 325069 to see how you can get a Smart Meter for your home.
Prepayment meter removal
Each supplier has different policies when it comes to prepayment meter removal. Here are some details about the Big Six energy suppliers:
British Gas, Npower and SSE require a credit check before they can tell you whether the prepayment meter can be replaced for free. On the other hand, EDF Energy and E.ON will remove a prepayment meter for free but only if you have been a customer with them for 12 months (EDF) or a credit check (E.ON)
EDF Energy won't do a credit check but, at the same time, will not change the meter if you owe more than £500.
- E.ON could charge you for any credit checks they deem necessary. If you are in debt or if you cannot pay future bills by direct debit, they may decide to charge you for the meter change.
Scottish Power is the most stringent by requiring you to be a customer with them for a full year and that you pay by direct debit moving forward. Even then, they might still charge you a cash deposit, refundable after the first year, and a prepayment meter removal fee.
Recommended energy suppliers
At Selectra, we are always reviewing the market to find the best energy companies and tariffs for both prepayment and direct debit customers.
Call one of our energy experts on 01704 325069 to see what the best deal is for you.