Switching From Prepayment Meter to Direct Debit: What You Need To Know

Switching from a prepayment meter to a direct debit could save you money and make it easier to manage your account. Here we’ll look at the potential benefits of switching from prepayment meter to direct debit, and what you’ll need to consider before making the switch.

Is direct debit cheaper than prepayment meter?

Potentially, yes! Tariffs for prepayment meters are typically more expensive. Although the Papernest team will always try and find the best deal for prepayment customers. Direct Debits are advantageous to energy consumers as they make it easier for them to manage their cash flow. Not to mention saving money on the costs associated with sending out paper bills, and chasing up late payments. Suppliers are happy to incentivise customers to pay by direct debit by offering more attractive rates.

A prepayment meter can give you more control over your energy usage. But you can expect to pay more for the privilege.

But before we go into the relative merits of prepayment meters, credit meters and direct debits, let’s start at the very beginning…

What is a prepayment meter?

A prepayment meter is an energy meter that not only records your energy consumption, it has the ability to restrict supply of electricity and gas to your home if you don’t have enough credit. With a prepayment meter, energy consumers pay for their gas and electricity on a Pay As You Go basis. Each meter has a smart card or key that can be topped up with credit at any [Payzone store](https://storelocator.payzone.co.uk/) or [Post Office](https://www.postoffice.co.uk/branch-finder). You can also top up online via your supplier’s website, or via their mobile app. Most suppliers will also allow you to top up over the phone.

What is a credit meter?

A credit meter, on the other hand, simply records your energy use. It does not need to be topped up. However, if you pay for your energy by direct debit, it’s pertinent to take regular meter readings on the same date each month. This will ensure that you are billed accurately. Otherwise, your bills will be based on estimates which in turn are based in historic energy usage in your home. Which, if you haven’t been in your home long, may not necessarily be *your* usage.

A smart meter can ensure that your bills are always accurate as it transmits your energy usage directly to your supplier.

Whether you have a credit meter or a prepayment meter, your energy tariffs fall into two broad camps. You can choose a fixed-rate tariff or a variable-rate tariff. The former locks in your energy costs for a fixed period (usually 12 or 24 months). A variable-rate tariff, on the other hand, rises and falls with the cost of wholesale energy.

Cheapest prepayment deals

Whether you have a prepayment meter or a credit meter, it’s important to keep switching to ensure that you’re getting the best value for money. The Papernest team are always on hand to help you find the perfect energy tariff for your needs.

It’s important to note that the cheapest deal for you depends on your location, needs and usage. However, using national average unit rates and assuming median average energy consumption of 12,000 kWh per year for gas and 2,900 kWh for electricity, we can identify some of the cheapest prepayment deals on the market.

Cheapest credit meter deals

So, how do the cheapest prepayment meter deals stack up against the cheapest credit meter deals? First of all, it’s important to note that getting the cheapest rates invariably means paying by direct debit. However, in the table below, you can find some of the cheapest fixed-rate energy deals on the market. These also assume UK average energy rates and consumption of 12,000 kWh of gas and 2,900 kWh of electricity per year. You can see the savings in relation to the energy price cap for credit meters which currently stands at £1,042 per year for both fuels.

The cheapest variable-rate energy deals can be found in the following table :

Why is prepayment more expensive?

Energy suppliers tend to give the best energy rates to customers who pay by direct debit. Energy companies operate on razor thin profit margins, which is part of the reason why so many of them have gone out of business lately.

When they know that they’re going to be getting a set amount of money from each customer, it’s much easier for them to manage their cash flow. And if a customer’s paying too much? No problem! They can simply save their credit for a time when their energy use is higher, or request a refund. Some suppliers will even pay interest on the credit that you build up with them.

How do I change from prepayment meter to credit meter?

Perhaps you’ve moved into a home with a prepayment meter and hate having to top up. Maybe your energy supplier moved you to a prepayment meter because of a debt that’s since been repaid. Whatever your reasons, you may find that your prepayment meter isn’t working for you. Here we’ll look at your available options…

Can you switch from prepayment meter to direct debit?

In most cases, yes. A supplier will switch you from a prepayment meter to a credit meter with a direct debit tariff as long as there are no prohibitively large outstanding debts to either themselves or your previous supplier. However, as we’ll discuss later, a charge may be incurred for this.

Prepayment meter vs direct debit : Which is better?

That’s a tricky question to answer, because every energy consumer has a slightly different interpretation of what’s “better”. Some of us are motivated entirely by saving money, while others prefer to feel in control of their energy spend and find it easier to get this feeling when they have a prepayment meter.

Perhaps the best thing to do is look at the potential advantages and disadvantages of switching to direct debit so that you can make an informed decision for yourself.

Advantages of switching to direct debit

If you choose to switch to a direct debit, you’ll enjoy a lot of potential advantages including :

• Cheaper energy bills because direct debit tariffs usually have the best rates
• A more predictable energy spend (as long as your usage is in line with your direct debit
• There’s a better range of tariffs and suppliers to choose from
• If your account is consistently in credit, some suppliers will even pay you interest on your credit

Disadvantages of switching to direct debit

Just be aware that there may be some things that you miss about your prepayment meter if you switch to a direct debit. For instance :

• Energy usage with a prepayment meter is capped, unlike with a credit meter
• If your energy usage exceeds the estimates you provided when you signed up for your tariff, you could get an unpleasant surprise when your bill arrives
• You’ll need to keep taking meter readings (or ger a smart meter) to ensure that your direct debit adequately covers your usage

My new home has a prepayment meter. What do I do?

If you move into a new home with a prepayment meter, the first thing you need to do is contact your supplier. Let them know that you have moved in and request a new key or card. We’d advise against using the previous occupant’s key or card without letting your supplier know first. This is because the previous occupant may have driven up a substantial debt that you don’t want to be liable for.

While you’re waiting for your new key or card, you can always top up online, in-app or over the phone. Once your new card arrives, insert it into your meter to activate it. You can now top it up at any Payzone location or Post Office.

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How much does it cost to switch from a prepayment meter to a credit meter?

Switching from a prepayment meter to a credit meter may or may not incur a charge. And this charge can vary depending on your supplier. However, according to Citizens Advice, your supplier cannot charge you to switch from a prepayment meter to a credit meter if it is unsafe or impractical for you to remain on Pay As You Go. If your meter is difficult to access, read or top up, you can make an argument that it’s beneficial for you to change to a credit meter or (better yet) a smart meter.

Even if your supplier charges you to replace your meter, this cost may be offset by your savings on a new tariff. You can always count on the Papernest team to find the best value tariff on the market.

Who arranges the installation of the new meter?

Your supplier will take care of the installation of your new meter. They will be in touch to let you know how to stay COVID-safe throughout the installation process, and let you know of safety precautions that your engineer will take to ensure your safety.

Can I change my prepayment meter for free?

The reality is that most suppliers will allow you to switch your prepayment meter for a credit meter without a fee. All of the “Big 6” energy suppliers (British Gas, E.On, N Power, SSE, EDF and Scottish Power) will allow you to switch meters free of charge. The only condition may be that you have no outstanding debts to the supplier, or any previous suppliers. Suppliers may run a credit check to confirm this.

Do energy companies run a credit check?

If you request to switch from a prepayment meter to a credit meter or smart meter with a direct debit, your supplier may run a credit check on you first. However, if you’d prefer that they not do this (e.g. if you’re worried about the effects of a “hard” check on your credit score), your supplier may be willing to forego this if you offer to pay a deposit instead. Your supplier will base this on the energy consumption of households like yours over the space of 3 months. This will usually be between £150 and £300. However, it may be more.

Why do energy companies run a credit check?

Essentially, it’s to mitigate their risk. When you have a prepayment meter, your energy use is capped, and you only pay for the energy you use. When you have a credit meter, your energy use could (theoretically) far exceed what you pay for in your Direct Debit. Energy companies run a credit check to ensure that you don’t have a history of running up unpaid energy debts.

How can I improve my credit score?

Unfortunately, if your credit score is subpar, paying your bills on time won’t improve it, as this information is not passed to credit agencies. One of the most reliable ways to improve your credit score is to take out a credit card with a low maximum spend. Use this for small purchases and pay it off in full as soon as you receive your bill.

What’s the best way to deal with prepayment meter debt?

The absolute worst thing you can do with prepayment meter debt is ignore it. The more communicative you are with your energy supplier, the more they can do to help you. Energy suppliers actively encourage you to get in touch if you’re having trouble with your bills and have entire teams dedicated to giving you the help and support that you need.

They will be able to arrange a repayment plan that allows you to repay your debt in a way that’s ,manageable for you. This is definitely more advisable than using a credit card to pay off your debts, as this will inevitably incur interest and leave you more out of pocket in the long term.

What can I do if I can’t change my prepayment meter?

There may be some instances where you cannot change your prepayment meter. For instance, your landlord may have stipulated in your contract that you are unable to replace your prepayment meter with a credit meter. But that doesn’t mean you can’t enjoy great savings on the energy you use.

The papernest team can search through the latest tariffs from a range of suppliers, including prepayment specialists.

Want to know more ?

• Do I have to switch energy supplier when moving ?
• How to switch energy supplier if in debt ?
• When is it possible to switch gas supplier ?
• Can I save money by switching electricity supplier ?

FAQ

What is the difference between a prepayment meter and a credit meter ?

A standard credit meter simply logs your energy consumption. A prepayment meter will restrict supply of energy to your home until you top up your meter’s credit. Your supplier will usually give you £10 or so in emergency credit to ensure that you aren’t left in the cold and dark if you’re unable to top up.

Is prepayment meter more expensive ?

A prepayment meter is usually more expensive. But the right tariff can make all the difference. The Papernest team can search through the latest tariffs from multiple suppliers (including prepayment specialists) to get the very best deal for you.

Can I change to a prepayment meter ?

Yes. You will usually be able to change to a prepayment meter free of charge.

Can I change meters myself ?

No. This is extremely dangerous. Only a qualified and certified engineer can change your energy meter.

What are the pros and cons of switching from a prepayment meter to direct debit payments ?

The pros are that direct debit payments are usually cheaper. And because there are lots more tariffs to choose from,  it’s easier to find a great value deal. Plus, you don’t have to go through the hassle of topping up whenever you need to use energy.

The cons, however, are that it’s easy to run up higher bills as your usage isn’t capped. What’s more, some feel less in control of their energy spend when they pay in this way.