Prepayment meters – also called prepaid meters – allow you to pay for gas or electricity upfront, rather than in monthly or quarterly instalments. You have to top-up a card or key and insert it into the meter every time you want to load some more money onto it. Just like a pay-as-you-go mobile phone, money is spent from that balance every time you use energy – and if you run out of credit, your power will be switched off.
Around six million households in the UK use a prepayment meter, according to statistics from industry regulator Ofgem.
Ofgem data. Correct as of December 2015.
What are the pros and cons of prepayment meters?
Here's a round-up of the advantages of prepayment meters, along with what you should look out for:
You can control what you spend and avoid shock bills
It tends to be more expensive
You could still switch suppliers
You’ll pay more when you use more
Prices are becoming more competitive
If you run out of credit, you’ll be cut off
Customers in debt
If you’re in debt with a supplier, prepayment meters can be installed to manage the arrears. This is done to help you pay off the debt in small amounts, rather than lump sums, as well as paying upfront for the energy you use.
Prepaid meters can also be a good way of budgeting; you can set spending limits by controlling how much you top up each time, and you can see how much money you’re spending by checking the balance displayed on the meter.
However, it’s normally one of the more expensive ways to pay for energy so it’s important that you check to see if you’re getting the best rates for prepaid electricity and gas. You can compare energy prices and suppliers to see if other pay-as-you-go electricity and gas tariffs could reduce your bills, and find out if you could save even more money by switching to an alternative credit tariff too.
Is prepaid electricity more expensive?
Most prepayment customers are charged much more for each unit of energy than people on standard credit meters. In fact, the cheapest prepaid tariffs were found to be £260 to £320 a year more expensive than those available for direct debit households. That’s according to the Competition Markets Authority’s (CMA), two-year investigation of the energy market.
Being on a prepaid meter also means you’ll miss out on the best offers, such as fixed rate tariff deals. However, increased competition is leading to more competitive pricing, and the recent introduction of a temporary price cap is saving customers around £300 million on their bills, according to the CMA.
Don’t forget that different energy companies charge different rates, so you could save money by shopping around. And it’s easy to change your provider - find out how to switch from a prepayment energy meter with our guide.
How to top up your prepayment meter
You may be able to top-up your gas and electricity key online, but in most cases you will need to physically do this. You can load money onto your prepaid keys and cards at the Post Office or at a shop with a PayPoint or a PayZone.
Once you’ve added a new balance, you simply insert the card or key into the meter and the money gets topped-up. Some suppliers will give you emergency credit for when you run out of balance, but this will need to be repaid. And if you don’t top-up your key or card, you risk losing power to your home.
If your prepaid key or card is lost or damaged, you should contact your energy supplier immediately. They will be able to sort a replacement – sometimes you can collect one from your local charge point while you wait for your new one to arrive – but you may be charged for any new cards or keys.
Moving home with a prepayment meter
Some people inherit a prepayment meter when they move to a new home. If this happens, you should register with the supplier as the new inhabitant immediately, or you could end up paying off someone else's debt.
How to remove a prepayment meter
If you rent, you need to seek permission from your landlord before you can remove a prepaid meter. Once you’re sure you want to change to a credit tariff, there are a few ways you can request the removal of one – but be warned that you may incur a fee, because suppliers may pass the cost on to you. Before you contact your existing energy company, it’s worth checking the different tariffs available – you might find that you could save money by switching providers.
If you find a new supplier you want to switch to, you can ask them to remove the prepaid meter for free. Some energy companies will do this, but others will still charge. If you want to stay with your existing provider, you may be able to negotiate the removal of the prepayment meter if you switch to one of their other plans.
Can I compare energy prices if I am on a prepayment meter?
If you use a prepayment meter, you can still compare energy prices and potentially switch to another cheaper prepayment deal.
If you are on a prepayment meter, you could switch to a fixed-rate deal and save.
You can compare your current prepayment tariff to alternative tariff options using our energy comparison tool.