A simples guide

What is best, prepaid meters vs direct debit

We all need electricity, gas or perhaps both, to power most things in our homes. When it comes to paying for energy however, there are a few different ways to go about it. 

Ways to pay

You can:

  • Pay quarterly by cheque
  • Pay monthly by direct debit
  • Pay via a prepayment meter

While direct debit is now by far and away the most popular method of paying for energy in the UK, there are almost 6 million people in the UK who have a prepayment energy meter in their home.

are prepaid energy meters cheaper

What is a prepayment meter and how does it work?

When you pay for your energy by direct debit or cheque, you’re paying for your energy after you’ve actually used it. With a prepayment meter, you’re paying in advance, before you use it. In many ways you could think of it as similar to having a pay-as-you-go mobile phone instead of one on a contract.

Prepayment meters have a slot or key hole on the front for you to insert a prepaid card or key. While the exact method of topping up your card or key can vary, they all need you to add credit before inserting it into the meter. This can be done via a shop with Paypoint or Payzone facility, or at a Post Office. Some suppliers are now also accepting top up via text, app or online.

Who would use a prepaid meter?

Prepayment meters are sometimes proposed to help people who’ve had problems paying off their energy bills in the past as they can help people to plan their payments and avoid getting back into debt. 

For the energy company it prevents further debts being built up, and the prepaid meter can also be used to help repay the money already owed. So, for example, £20 might be added to the card of which £5 goes towards the old debt and £15 to new energy when it is inserted in the meter.

Ofgem also introduced a prepayment cap to prevent spending loads on your energy. 

Some landlords also choose to fit them to their let buildings so they don’t get left with unwelcome bills with interest when tenants leave their property.

prepaid energy meters - is it cheaper?

Does having a prepaid meter make energy cheaper than paying by direct debit?

Unfortunately, no. Prepaid meters are often added to the homes of those struggling to pay for their energy and the tariffs end to be higher than those for a standard meter. Even with the best pre-payment deal people pay an average of £91** a year more than those paying by direct debit.

are prepaid meters cheaper than direct debit

But can I still save money on a prepaid meter?

Better news, yes you can. Though most deals won’t be available to you as a prepaid customer, every energy company usually has at least one prepaid tariff. This means it should still be possible to shop around for your energy and hopefully as a result, save some money.

It also hopefully goes without saying, but if you want to save money on your energy, the easiest way to do it is to be very careful with how you use it. Don’t leave lights on when you’re not in the room, don’t leave appliances plugged in using energy, and only use what you need – for example don’t boil a whole kettle full of water if it’s just you wanting a cuppa.

Can I change my meter?

If you move to a property and inherit a prepayment meter, it’s important to contact your energy company and ensure that they have your details. You should then be able to change your meter for a regular one if you want to – though they may run a credit check as part of the direct debit process, so it’s something to bear in mind.

If you had past issues with energy bills but those are now behind you, you may be able to get your prepaid meter changed too. The supplier may insist that your account is debt free and you’re very likely to also have a credit check.

Be sure to ask if your energy company will charge you for the change. Some do and some don’t, so it might be worth shopping around if they want to charge you something for the swap.

If you’re on a prepaid meter, you might still save money by switching energy supplier. Our service allows you to search only prepaid energy deals so you’ll find out what you could save by changing suppliers.

It’s really simple. Try it today!

** https://www.citizensadvice.org.uk/consumer/energy/energy-supply/get-help-paying-your-bills/stop-your-energy-supplier-installing-a-prepayment-meter/