Four million households in the UK are currently using prepayment meters, according to the energy regulator Ofgem.
In this guide we take a look at how they work, the advantages and disadvantages of prepayment meters, and how to switch to a credit meter.
Typically, prepay energy customers have fewer deals to choose from, but if you’re thinking of switching your energy supplier to find a cheaper tariff, see how to find the best gas and electricity deals. And if you’re struggling to pay, see help with gas and electricity bills.
What is a prepayment meter?
What is a prepayment meter?
Prepayment meter advantages
Using a prepayment meter to pay for your gas and electricity in advance has a number of benefits:
- You control how much and how often you pay for your energy.
- Standard prepay prices under the energy price cap are now cheaper than direct debit.
- Helps prevent running up large and unexpected bills.
- Helps you avoid running into debt with your energy supplier.
- If you’ve fallen into debt, it helps you pay back the outstanding balance in agreed amounts over a set period of time.
Prepayment meter disadvantages
- Topping up at your local shop or newsagent can be inconvenient if you don’t have a smart prepay meter.
- The cheapest fixed deals are usually for standard direct debit customers, so you may not have a lot of options to choose from (see how to do an energy comparison).
- If you can’t get out to top up your meter, your energy may be switched off, leaving you without any power.
- If you forget to top up your meter before you leave the house for a few days or go on holiday, you may come back to a melting freezer because the power has switched off (the daily standing charge will be eating away at your credit).
Are prepayment meters more expensive than direct debit?
With prepayment meters, you pay for energy before you use it, so it helps with budgeting and you are more aware of exactly what you are spending.
Traditionally, prepay was more expensive than direct debit for those on standard tariffs that follow the price cap (most of us right now). But the Government has taken steps to level this up and it is no longer the case. If you’re on a standard prepay tariff using a typical amount of energy you’d currently pay around £2,046 a year. If you pay through direct debit, it’s about £30 more at £2,074 a year.
From 1 October, the annual prepay bill for a typical household will drop to £1,908, which is about £15 less than direct debit. See energy price cap explained for how it works, and Will energy prices go down? for predictions on what is expected to happen to energy bills over next next year
If you're on an older prepayment meter, see if you can get a smart meter
The majority of energy firms now offer smart prepayment meters for free and they can make things a lot easier.
They come with an in-home display which shows you exactly how much energy your home is using in pounds and pence, in almost real-time, and also how much credit you have remaining. This enables you to track what you use and understand where you can make reductions in your energy use to help save money.
They also make it a lot easier to top up as you can do it online, via an app, by text or over the phone, so there is no need to head out to the local shop to top up.
It also makes it easier for any payment to be added to your account. For example, last winter all homes got £400 bill support paid by the government over six months. For those on smart prepay meters, it was added to people’s meters remotely, for those on traditional prepay meters, they were sent vouchers to redeem in the top-up shop (though note, no support is currently planned for this winter – see help with energy costs).
The other great thing is if you’re eligible, you can easily switch to a credit tariff. A smart meter can be switched between prepay mode and credit mode remotely, so your supplier will not need to fit a new meter in your home.
See smart meters explained for more, and the advantages and disadvantages of smart meters.
How do I switch from a prepayment meter to a standard credit meter?
You’ll need to ensure that your energy account is debt-free, for starters, and suppliers will usually run a credit check to make sure that they can trust you to pay your direct debits on time each month.
Most major energy firms will let you switch from a prepayment meter to a standard credit meter for free -though some smaller supplier charge a fee, so do check.
This may be worth looking into as energy suppliers are bringing back fixed-rate deals for those on standard credit meters – see how to find the best gas and electricity deals.
If you are renting, you should get permission from your landlord first before switching from a prepayment meter to a standard credit meter, though you don’t need permission to just switch tariff.
Can I change energy supplier if I have a prepayment meter?
We’ve got good news and bad news. The good first: yes, you can switch energy supplier if you have a prepayment meter in your home.
Now the bad: if you’d like to do an energy comparison and switch to the most competitive tariffs, you’ll also need your change your prepayment meter to a credit meter (see above).
What happens if I run out of credit?
What other types of meters are there?
Economy 7 meters and economy 10 meters are other types of meter, where you can get a cheaper rate for your usage for either seven or 10 hours of the day.
- Economy 7 meters track your usage separately depending on if it’s daytime or night-time – the night rate is usually much cheaper.
- Economy 10 meters are similar, but you get three of your cheaper hours in the afternoon in addition to the seven at night.
