All you need-to-know on prepayment meters and tariffs

The complete guide to Prepayment Meters

Customers who pay for their gas and electricity supply through a prepayment meter often end up paying more on their energy bills compared to those who pay through direct debit. Instead of paying via direct debit or on receipt of a bill, customers who use prepayment meters have their energy supplied to them on a ‘pay as you go’ tariff.

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How to save money if you’re on a prepayment meter

Aside from prepaid customers being more restricted, it’s important to remember that there are alternative options out there.

You may be able to switch to a different type of meter by contacting your energy supplier. However, this could prove challenging depending on your current circumstances and/or if you’re renting your property.

If you are unable to move away from a prepayment meter in the short to medium term, it’s still a good idea to compare energy. You should still be able to switch to a new tariff and/or supplier and start saving money.

In 2015, the CMA stated that prepayment customers who switched tariffs and/or providers were generally seeing savings between £70 to £120, depending on the supplier. Although customers on alternative meters who switched were saving a lot more, it gives you a general idea that money can still be saved on a pay as you go meter.

When you compare quotes online through an energy comparison site, you will be asked how you normally pay for your energy. ‘Prepayment meter’ is listed as one of the options that you can select.

If this is selected, we’ll show you what suitable options are available for prepayment customers. You should still be given a number of different choices that could help you save money.

It may also be worth looking out for collective switching deals, in addition to reading our helpful guides on how you can save money on your energy bills.

Why are people placed on prepayment meters?

Can I switch from a prepayment energy meter to a credit meter?

If you wish to switch from a prepayment meter to a credit meter, it’s a relatively straightforward process, but will depend on your current circumstances.

Homeowners on prepayment meters

If you’re a homeowner, you should contact your current energy provider to check if switching is a possibility. The decision will partly be influenced by your credit history, as suppliers will conduct a credit check to ensure you can comfortably manage the repayments.

Once you have met the criteria, your supplier will arrange for an engineer to replace the meter. In some cases, the provider may request that you pay an administration fee for the replacement meter.

If you decide not to challenge this fee and end up having to pay it, it’s important to remember that you’re still likely to save more money on your energy bills than you would have to pay for the initial meter installation. Once you have been switched over to a credit meter, it’s highly recommended that you compare energy prices with Utility Saving Expert to see how much more you could be saving.

Tenants on prepayment meters

If you’re a tenant, switching from a prepayment meter over to a credit meter could prove to be more challenging, but it can be done.

Firstly, you should get in touch with your landlord. If the landlord does say ‘no’, you should still be able to switch to an alternative prepayment energy tariff and/or a different supplier.

Why are prepayment tariffs more expensive?

Why don’t more prepayment customers switch energy suppliers?

In most cases, prepayment customers are perceived to be less engaged compared to their direct debit paying counterparts. Because of this, they are less likely to switch tariffs or providers. The CMA claimed that there were three main reasons for this lack of engagement:

Firstly, customers faced a number of hurdles accessing switching information, reasons include reduced internet access and reduced confidence in price comparison sites.

Secondly, this group contains a high proportion of customers with a lower income level; lower level of education; living in social rented accommodation; with a disability. The CMA found these demographic characteristics to be associated with the reduced level of engagement in the energy market.

hirdly, the reduced amounts of savings that are actually made when switching and the confusion surrounding this whole process.

For those on prepayment meters, including a large number of the most vulnerable customers in the UK, there are a limited number of options to choose from compared with those on an alternative type of meter.

To summarise, the lack of engagement highlighted above makes it far more challenging for suppliers to be competitive, far more difficult for customers to switch, with far fewer options available. Gas and electricity are both indispensable and expensive for the majority of these four million UK households, especially with their cheapest tariffs costing around £300 more than credit meter customers.

This is why the CMA has proposed a transitional price control which will continue until 2020, allowing customers to take advantage of their measures, in addition to current developments such as the installation of smart meters across homes in the UK.

Switch supplier and save up to £450.42* on your gas and electricity bills