Lots of homes have prepayment meters for gas or electricity. Using a prepayment meter means you pay for your energy before you use it – on a pay-as-you-go basis. This is done by buying credit, usually with a key or smart card, and adding this to the meter. As you use gas or electricity, the credit on the meter is used up.
This is different from a quarterly bill where you pay after you have used it, based on a meter reading or estimate. It’s also different from paying a set amount per month by direct debit, where your fuel supplier estimates your annual usage and takes a fixed monthly payment, spreading your energy costs evenly over the year.
How do you use a prepayment meter?
Almost all prepayment meters use either a key or a smart card, (pictured below). Some holiday cottages or bedsits still use meters that take coins or tokens – but these are rare.
Prepayment meter keys look a bit like computer memory sticks. Each key is exclusive to a particular meter and won’t work with any other. Newer meters use smart cards rather than keys.
To purchase credit for your meter, you simply take the key or smart card to an official PayPoint or Payzone outlet which can be found in most supermarkets, some local shops and some post offices. It is illegal to buy credit for a prepayment meter from anywhere else, but some charities and other organisations distribute prepayment meter fuel vouchers to people who are at risk of being cut off, or in other cases of need.
Some energy companies accept online payments or even have apps you can use on your phone. Contact your energy supplier or visit their website for details.
When your key or card is topped up, simply stick it in the meter which will top up with the amount of credit you’ve paid for. The meter displays how much credit you have left; when this runs out you must top up the key or card again.
Prepayment meter emergency credit
Prepayment meters give you a small amount of emergency credit which is designed to maintain your energy supply after your regular credit has run out and before you’ve had a chance to top up. Any emergency credit that has been used is reclaimed from the amount you have topped up when the key or card is put back in the meter.
Prepayment meter pros and cons
- Help with budgeting. Compared to quarterly bills or a direct debit, payments tend to be smaller and more frequent. You can top the meter to suit your circumstances and there are no large or unexpected bills to worry about.
- Avoid debt. Prepayment meters also prevent customers from getting into debt as they only allow a small amount of emergency credit to be used before the meter has to be topped up again. (For those already in fuel debt, suppliers often recommend a prepayment meter which can be set up to repay a specific amount of fuel debt each week, based on how much the customer can afford.)
- They can be inconvenient. Your meter might run out at awkward times, and you may live a long way from a shop or other outlet where more credit can be bought.
- Your key or card can be lost or damaged. Your supplier will probably replace it for free, but if this happens often they may charge you for replacements
Do prepayment meters cost more?
Prepayment meter customers don’t get the best deal. In most cases they pay their supplier’s standard rate for gas or electricity, which is typically more than the rate for quarterly billing or direct debit, and prepayment customers cannot take advantage of discounts for paperless billing.
Another drawback is that, unlike monthly direct debit, prepayment customers can’t spread their payments evenly across the year, so pay much more in the winter than in summer. This can present difficulties with household budgeting.
One way round this is to put a sum of money each month into a separate bank account from which you top up the meter – building up a surplus in the summer that can be used in the winter. This is a bit like creating your own direct debit; and if you can manage this, then consider asking your supplier to switch you to a credit meter and a direct debit tariff. This will end up saving you money.
Daily cost of energy: the standing charge
Prepayment meters include a standing charge. This is a fixed daily amount that you have to pay, no matter how much energy you use. A standing charge covers the cost of supplying your home with gas or electricity and everyone has one, whatever sort of meter or payment plan they have. It’s a bit like a phone line rental, but for your energy.
If you forget about the standing charge you may have less credit available than you think you do.
And, if you haven’t topped up for a while, when you finally do add credit to the meter it will automatically deduct all, or a percentage of, the unpaid standing charge, swallowing up lots of the credit you’ve just added. The same goes for any fuel debt repayments being taken.
Fiona switched off her gas central heating over the summer and she didn’t top up her gas meter because she wasn’t using any gas.
But the meter still took 27p a day for the standing charge. The standing charges built up and up.
In October, Fiona wanted to turn the heating on so she added £20 credit to the meter, but found she was in debt from the standing charges.
This meant she had to top up even more than she’d budgeted for.
If you are going away and won’t be using any gas or electricity (or at least very little), it’s important to top up your meter so there’s enough credit for the standing charge as well as for things like the fridge or freezer that need to be left on. To make your credit go further, unplug anything that doesn’t need to be left on, including appliances on standby.
The standing charge (and any fuel debt) will still apply even if you completely run out of credit, stop topping up your meter and are left without gas or electricity. This is sometimes called ‘self-disconnection’.
Unfortunately, if this happens you end deeper into debt even though you aren’t using any fuel. Find out what could happen if you stop paying your energy bills.
Moving into a home with a prepayment meter
Each prepayment key or card is unique and will only work in a specific meter, so if you move to a new house or flat that has a prepayment meter your old key or card won’t work, and you’ll need to ask your energy supplier for a new one.
Don’t use an old key or card left behind by the previous occupant. Contact your energy supplier at least three days before moving in and ask if the meter needs to be reset or if you need a new key or card. This will ensure that you pay the right energy supplier, and that you aren’t paying for gas or electricity used by the previous occupant (or, worse still, their outstanding fuel debt).
This is also an opportunity to ask questions about how the meter works and to check that you are on the best tariff the supplier has to offer, or to consider switching suppliers.
Switching and prepayment meters
Being on a prepayment meter does not prevent customers from switching tariff or supplier. The process of switching is the same for those with credit meters. It is possible to switch even if you are in fuel debt, as long as the debt is not greater than £500. Tenants who are responsible for paying their bills have the right to switch provider.
It is also possible to switch from a prepayment meter to a credit meter. Some fuel suppliers will install a new meter for free, although in most cases you will need to pass a credit check or pay a refundable deposit. You have the right to change payment method if you are a private tenant as long as you are also the bill payer.