Prepayment can be a useful way of keeping on top of your energy use and managing your household budget. But it can also stop you accessing the cheapest deals for your gas and electricity.
While some homes have always had a top-up prepayment meter, other households have had one installed by their energy supplier after going into debt on their energy bills.
A prepayment meter means you pay in advance for the gas and electricity you use, by topping-up your meter with credit.
They’re also called pay-as-you-go meters, prepaid meters, and keypad meters in Northern Ireland.
If you have a prepayment meter, you’ll usually have a card, key or token that you can top-up with credit. You can usually do this at a shop where there’s a PayPoint or PayZone, at a post office, online or by phone.
Around four million homes in England, Scotland and Wales have them. In Northern Ireland, prepaid meters are one of the most common ways of paying for your electricity and gas (62% of gas customers and 45% of electricity customers pay this way).
Not all energy companies accept customers with prepayment meters, though the choice is widening. All of the biggest energy firms, including British Gas, EDF Energy, Eon, Npower, Scottish Power and SSE (now part of Ovo) sell prepayment meter tariffs. Octopus Energy and Bulb sell them too – Bulb launched its most recently in 2020.
There are several firms which supply only (or mainly) prepayment meter customers:
The cheapest dual-fuel deal costs £914 a year for a household using a medium amount of gas and electricity paying monthly by direct debit. With a prepaid meter, the cheapest deal for the same household would cost £972 per year (correct February 2021, for a medium user*).
Some suppliers charge prepayment meter customers between 2-4% more for the same tariff.
Most energy tariffs are made up of a standing charge (paid daily, whether or not you use any gas or electricity) and a unit rate (the amount you per kilowatt hour of gas or electricity you use).
How much you pay in standing charge and unit rate varies between tariffs, whether they’re prepayment tariffs or direct debit tariffs.
You can choose between fixed and variable rate prepayment tariffs. Fixed tariffs mean that your standing charge and unit rate won’t change during your contract. Variable means that they can change whenever your energy firms raises or lowers its prices. So it’s worth checking at least once a year whether you can get a cheaper rate.
Use our independent price comparison website, Which? Switch, to compare gas and electricity prices for prepayment meters. [https://switch.which.co.uk/]
Energy suppliers must offer emergency credit to customers who are struggling to top-up their prepayment meter, since December 2020.
This might be because you can’t get to your local shop (for example, if you’re self-isolating) or you can’t afford to do so.
Companies also have to offer extra prepayment credit for households in vulnerable circumstances while they work out alternative payment arrangements with you.
Energy regulator Ofgem introduced these new rules to try to reduce the number of customers with prepayment meters who go without energy after running out of credit on their meter.
If you are in debt to your energy company it must work out a ‘realistic and sustainable’ repayment plan. This could include setting payment rates based on how much you can afford to pay and getting in contact with you proactively. Many suppliers do this already.
Some prepayment meter tariffs have been capped since 1 April 2017. The government introduced this because customers who paid in advance typically paid more than those with standard meters who paid by direct debit.
The price cap limits the amount that energy firms can charge their customers with prepayment meters on out-of-contract tariffs. It sets a maximum cost per unit of gas or electricity. It is not a cap on your total bill.
The price cap on out-of-contract prepayment meter tariffs has been raised and lowered several times since it was introduced, as you can see below.
Even with the price cap in place, you could still save more by switching supplier or by changing your prepayment meter. Read on to find out how.
You can have a smart meter whether you pay-as-you-go, by direct debit, or when you get a bill. If you have one, how you pay can be changed without needing to get a new meter. Not all of the big firms are installing them yet but will start shortly – check with your supplier.
Having a prepayment smart meters means you’ll be able to top-up online or using an app on your mobile phone or tablet. You can still top-up in person but you won’t need to put your card or key into the meter. Instead your payments will be added to your account automatically.
If you have a smart prepayment meter, your in-home display will show you:
To access the cheapest tariffs, you need a meter that can be set-up for direct debit tariffs. If you have a smart prepayment meter, your payment method can be changed without you getting a new meter installed.
If you have a traditional prepayment meter, you’ll need to get it replaced with a standard credit (bill-paying) meter or smart meter.
None of the biggest energy suppliers charge to swap a prepayment meter to a standard credit meter anymore. If you’re with a smaller supplier, check with the company as to whether there’s a fee to change your meter. No firms charge to install smart meters.
Most of the big companies, except and , will run a credit check. This can show up on your credit file, meaning potential lenders can see it. Check the table below for other criteria you’ll need to meet to get your prepayment meter changed.
The criteria are the same whether you have a traditional or smart prepayment meter. The only difference is that if you have a smart prepayment meter your energy firm should be able to change how you pay without visiting your home to replace the meter.
Criteria for changing from prepayment meter to direct debit
Soft or hard credit check, taking into account your credit history and whether you have previously had repayment problems. You must also be debt-free to join British Gas. Current customers must have had less than £50 debt for 12 months.
Boost only supplies customers with prepayment meters so you'll need to move to Ovo Energy to pay by direct debit. Ovo Energy doesn't credit check customers in vulnerable situations.
Soft credit check.
No credit check. Customers must be in credit, and not have been in debt in the past three months. You must have had a prepayment meter at least 12 months and not had another prepayment meter for the same fuel within three years.
Hard credit check and you must pay off any outstanding debt on your meter.
Existing customers must be debt-free and have good payment history for the past six-to-nine months. New customers may be credit-checked. If your credit is poor, you can pay a £250 security deposit per fuel instead, refundable after 12 months.
Assessed on a case-by-case basis. Checks can include time as a customer, energy usage, top-up behaviour, whether you are paying back debt, credit check and general income and expenditure check.
Credit check and you must either debt-free or set up a repayment plan. If your credit rating is poor, you may also need to pay a security deposit of £150 per fuel, refundable after a year if you pay on time.
Hard credit check and your must pay off any outstanding debt on your meter.
1 Information correct in February 2021.
If you’re with a smaller supplier that says it’ll charge a fee to change your meter, you could switch to another supplier that doesn’t and then get it to change your meter instead.
You can switch supplier as long as you have less than £500 of debt for gas and electricity, energy regulator Ofgem says. Its Debt Assignment Protocol lets you switch to another supplier and repay the debt to it instead, based on your agreement with the new supplier.
If you can’t get rid of your prepayment meter, ask your energy supplier to put you on its cheapest deal for your usage.
We've outlined some of the most common problems that prepayment meter customers experience, and how to deal with them.
*A medium user is defined by Ofgem as using 12,000kWh gas and 2,900kWh electricity per year.