10 Things to Consider When Buying prepaid energy meter

Prepayment or &#;pay-as-you-go&#; meters are a type of gas and electricity meter that require you to pay for your energy before you use it. This is different to a credit meter where you pay for your energy after you use it.

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Around four million households across the UK are on prepayment meters, according to the energy regulator Ofgem. Here&#;s what you need know about them.

How do prepayment meters work?

Much like pay-as-you-go mobile phones, prepayment energy meters must be topped up with credit in advance. The method of top-up can vary depending on the energy supplier and meter, but it will usually be a token, key or smartcard.

Top-ups can be made at your local Post Office or any shop where you see the PayPoint or Payzone logo, such as newsagents, local corner shops, garages and supermarkets.  

Some older prepayment meters are coin operated, where you put money directly into the meter, although they are now quite rare.

Smart prepayment meters

Smart meters are the new generation of gas and electricity meters. They allow you to view how much energy you&#;re using at home in real time in pounds and pence, with the aim of helping you to cut down on energy usage and save money.

All households in England, Scotland and Wales must be offered a smart energy meter by the end of . This includes smart prepayment meters. Your energy supplier will tell you when you can get one, but you can also request one yourself.

Smart prepayment meters mean you can top up online or via an app on your mobile or tablet, without the need to leave the house. If you set up an online account, you will also be notified when you&#;re about to run out of credit.     

Emergency credit

If you can&#;t afford to top up your meter or you can&#;t get to an outlet to buy credit, most prepayment meters have emergency credit you can use. This is typically around £5 for electricity and £10 for gas.

Note that prepayment tariffs have a standing charge of around 25p to 30p a day that must be paid regardless of whether you use any gas or electricity. You&#;ll need enough credit to account for this.

Why might you have a prepayment meter?

Your property may have already had a prepayment meter fitted when you moved in, or you may have asked your supplier to fit one to make it easier to budget. If you are renting, your landlord might have opted to have a prepayment meter fitted to ensure tenants do not leave behind unpaid bills.

Your energy supplier may choose to fit one if you have fallen into debt on your energy bills. Prepayment meters can help households repay outstanding debts in small amounts, rather than in one lump sum. If you top up your meter with £25, for example, £5 of this might go towards the existing debt and the remaining £20 towards new energy.

Can you switch prepayment tariffs?

Your choice of tariff will be more limited if you have a prepayment meter, but it&#;s still worth shopping around to see whether you could save money by switching.

Thanks to the Debt Assignment Protocol, you&#;ll still be able to switch if you&#;re in debt to your supplier, providing you don&#;t owe more than £500 for your gas and £500 for your electricity. Your debt will be transferred to your new supplier, and you&#;ll repay them instead based on the new terms of your agreement. 

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The switching process is the same as it is with a credit meter. Once you&#;ve run a comparison and found a new prepayment tariff to move to, your new supplier will take care of the switch. The switch should take around 21 days to be completed.

Can you move to a credit meter?

Prepayment meters can be useful as they help with budgeting. Also, as of 1 July , the price differential between prepayment meters and standard credit meters no longer applies. Prior to this date, prepay customers were charged more than direct debit customers, ostensibly to account for greater infrastructure costs, but the government decreed that the two types of meter should have the same charging structure in the spring of .

However, if you would prefer a credit meter, most energy suppliers will allow you to switch, providing you meet certain conditions. You&#;ll usually need to pay any outstanding debt on your account, for example, and you may need to pass a simple credit check.

Many suppliers will install a new meter for free, but others may charge, so check first. If you&#;re renting, you&#;ll need to get your landlord&#;s permission to switch meters.

What if you move home?

If you&#;re moving out of your home, aim to run the balance left on the prepayment meter as close to zero as possible. Contact your energy supplier in advance with your new address so that any remaining credit can be refunded. Or a repayment plan can be set up if you are in debt.

Don&#;t leave the key or card in the meter as this will drain the meter&#;s battery. Instead, leave it with your landlord or next to the meter for the new owners.

If you move into a property with a prepayment meter, contact the energy supplier as soon as possible. Try not to top up the meter before you move in as you could be paying for the previous occupants&#; debts. If you do top up, your supplier should refund you for any extra charges applied.

What is the prepayment price cap?

The prepayment price cap was introduced by Ofgem in . Updated quarterly, it limits the amount energy suppliers can charge per kWh of gas and electricity (also known as the unit rate). Its purpose is to help ensure customers are protected from being overcharged.

A similar cap is in place for those with credit meters who are on standard variable or &#;default&#; tariffs. This is also reviewed quarterly.

What is prepaid electricity?

A prepaid electricity plan is similar to having a bank account dedicated to your electricity bill. As the name implies, you pay for your electricity beforehand and can reload money to your account whenever you like. These plans often come without the commitment of a contract or the expense of a deposit, and many offer a variable rate.

What is a postpaid or traditional contract plan?

With a postpaid or traditional contract plan, you will be billed for your usage after the fact, usually on a monthly basis. These plans can come with contracts and deposits and often offer a fixed energy rate.

Pros and cons of prepaid electricity

Prepaid Electricity is not for everyone. To help you decide if it&#;s right for you, we compiled a list of pros and cons. 

Pros:

1. Easier budgeting. You&#;re in complete control of how much you pay and when. You can make payments online or by at any time, and as long as you keep a positive balance in your account, the electricity keeps flowing. 
2. Easy alerts. You&#;ll receive text or alerts when your account is running low, along with estimates of how many days your remaining balance will last. 
3. Detailed usage information. You&#;ll have online access to detailed information about your electricity consumption, which can help you develop strategies to further reduce your electricity costs.
4. The advantage of variable rates. While high-demand seasons can increase variable rates, you&#;ll enjoy a reprieve with lower rates in cooler seasons. During these months, your payments will go further, and you&#;ll have room to save up for the rate increases. Cooler weather also makes it easier to engage in energy-saving habits, making it even easier to save.
5. No deposits, no credit checks and no commitment. Best of all, prepaid electricity plans are quick and easy to set up, with no credit checks, deposits or contracts required. Simply open an account and add funds, and the electricity will flow.

Cons:

1. Higher rates. When you&#;re evaluating the pros and cons of prepaid electricity, you&#;ll find that there are very few downsides. In most cases, the only downside to a prepaid plan is that the rate per kilowatt-hour (kWh) may be slightly higher than the rates on comparable traditional postpaid plans.
2. The downside of variable rates. You may also run into more variable-rate prepaid plans than you would with traditional plans. With variable rates, your energy rate per kWh can change with the seasons, increasing during high-demand periods. That means during hot Texas summers, when everyone is blasting their AC, these seasonal rates could be much higher than desired, making it harder to stretch your dollar.

Who should get a prepaid electricity plan?

Here are some of the circumstances that make a prepaid electricity plan a perfect fit for you:

• You have bad credit or no credit. With post-paid electricity plans, some electricity providers may require deposits or refuse service if you have a low FICO credit score or if the National Consumer Telecom & Utilities Exchange (NCTUE) has records of late or unpaid utility bills. But with a prepaid electricity plan, credit checks won&#;t hold you back.
• If you have no credit, you might also find that electricity providers require a deposit for postpaid plans. A prepaid plan is a cheap and easy way to establish a record of timely payments, which can make those deposit requests disappear.
• You&#;re on a tight budget. Deposits, billing fees and the occasional sticker shock from big bills can make it difficult to keep the lights on if you&#;re low on funds. A prepaid plan lets you avoid unnecessary costs and big bills and allows you to easily track your usage and your budget.
• You&#;re a stickler for energy conservation. If you&#;re really trying to minimize your household electricity consumption, a pay-as-you-go plan can be a functional part of that strategy. You may be more aware of how much electricity you&#;re using with the help of alerts, real-time data and total control over your payment schedule.
• You&#;re on-the-go. Most post-paid plans require contract commitments of months or years. If you&#;re a frequent mover or if you have plans to relocate soon, a prepaid electricity plan can give you month-to-month flexibility.

Who should get a contract electricity plan?

For some people, a postpaid or contract electricity plan is a better fit for their lifestyle. Here are some situations in which a contract electricity plan is a better fit:

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• You  want to lock in a competitive fixed rate. If you want to take advantage of lower fixed rates in the marketplace, then locking in a contract electricity plan over multiple years could be a great fit for you.
• You crave stability and predictability. With a postpaid electricity plan, you pay for your usage after the fact at a set billing date every month. And when you factor in the low, competitive rate you locked in over multiple years, it's pretty easy to approximate what your bill will be each month. In addition, contract electricity plans free you from worry about constantly monitoring your usage and your account balance.
• You want another way to build your credit. While you can't impact your FICO score by paying your bills in full and on time, there are alternative credit score groups out there who take paying utility bills in full and on time into consideration when issuing credit. 
• You or someone in your household has a critical care or chronic care condition as defined by your utility. If losing electricity service could result in a serious illness or a dangerous or life-threatening condition, then you are only eligible for a contract electricity service.
• You have a good credit history and can afford a deposit. Deposits are often required for starting a new utility service and can be 1-2 times the amount of a monthly bill.