Will a prepayment meter make it easier to budget?

Many individuals need to cut back their gasoline and electrical energy payments and are questioning if switching to a prepayment meter will assist.

So may a prepayment meter make it easier to to make use of much less vitality and finances extra simply for these excessive costs? Generally a provider will recommend it’s best to change, saying the budgeting shall be simpler.

However in 2022 and early 2023, many vitality suppliers forcibly put in prepayment meters in properties the place individuals had been in arrears. Or swap a wise meter to work as a prepayment meter.

This text seems to be on the professionals and cons of a prepayment meter and whether or not one actually will make it easier to finances higher.

Sorts of gasoline and electrical meters

Let’s begin by taking a look at the different types of meter as this may be complicated.

A meter measures the vitality you employ.

The principle distinction between the categories is how you need to pay for the vitality:

with a prepayment meter you need to pay to your vitality earlier than you employ it;
with a credit score meter you pay afterwards, eg by direct debit or by paying when a invoice arrives.

A sensible meter can work in “prepayment mode” or “credit score mode”. You might have had a wise meter put in “in credit score made” so you may see the additional data – it has a show displaying what you’ve utilized in a day/week and what that has value. However your provider can then resolve to modify your sensible meter to work in prepayment mode – typically that is taking place with out individuals even being instructed.

There are two other ways so as to add cash onto a prepayment meter:

with an old-style pre-payment meter you load a key or a card with cash at some native retailers or a Submit Workplace. Then you definitely replace your meter with this. The image beneath exhibits an old-style prepayment meter with a inexperienced key getting used.
with a wise meter used as a prepayment meter you may load up the cash on-line or with a key/card.

Execs – a prepayment meter could seem to assist with budgeting

Some individuals discover vitality payments very complicated:

plenty of small numbers with decimal locations that appear so as to add as much as a fortune;
abbreviations akin to kWh don’t assist.

Utilizing a prepayment meter means you may suppose in actual kilos about what you might be spending.

It additionally helps you to put a cap on what you spend – in the event you can solely afford £20 every week, that’s what you load up. And you’ll see how a lot of it you’ve left.

Cons – the massive issues with prepayment meters

Prepayment meter prices are dearer

£10 buys you much less electrical and gasoline if you end up utilizing a prepayment meter. The precise costs depend upon the place within the nation you reside, see What are the vitality worth assure unit charges? for the main points.

It isn’t much more. If this was the one downside with prepayment meters, chances are you’ll really feel it’s value paying a bit extra if it helps you finances higher and is extra handy.

However added to the opposite issues right here, it’s one more reason to keep away from them in the event you can.

UPDATE – from July 2023, costs for gasoline and electrical on a prepayment meter had been modified to be the identical as in the event you had been paying by direct debit. It will save the common family about £45 a yr,

Standing order prices should be paid even in the event you use little or no vitality

There are two prices for gasoline and for electrical energy – the unit worth and a each day standing cost.

The unit cost for utilizing a prepayment meter is almost the identical because the unit cost in the event you pay by direct debit. However the common each day standing prices are a lot increased:

for gasoline, the standing cost in the event you pay by direct debit is 28p a day. When you’ve a prepayment meter, it’s 38p a day;
for electrical energy, the standing cost by direct debit is 46p a day. With a prepayment meter it’s 51p a day.

(These are spherical numbers and once more they fluctuate by area, see the hyperlink above for what yours can be.)

So when you have gasoline and electrical, you may be paying about £27 a month on a prepayment meter earlier than you employ any vitality in any respect.

What can occur? A few examples:

Say you had been in need of cash so didn’t high up the gasoline when it ran out. You left it off for 10 days till it acquired very chilly so that you added £20 and put the heating on. Instantly £5.10 of your £20 top-up is deducted to pay for the standing cost for the ten days it was off. And extra is deducted in case you are repaying arrears. So chances are you’ll get little or no warmth for that £20.
In the event you attempt to simply use the heating within the night when it’s coldest, the excessive standing cost will imply you might be paying so much for not a lot warmth.

It is a merciless system that penalises people who find themselves making an attempt to make use of as little vitality as doable.

You face the very best prices in winter once you want it probably the most

Many individuals’s foremost purpose for wanting to cut back their utilization is that they will’t afford the direct debit their vitality provider is asking for.

However a direct debit evens out your vitality payments throughout the yr. You pay the identical in winter as you do in the summertime. This makes it simpler to finances for the additional vitality you will want when it’s coldest.

In the event you swap to a prepayment meter in the summertime or autumn, it could really feel like you might be saving cash and you might be extra in management. However it means you’ll face extremely excessive prices within the coldest three months, with excessive vitality utilization being is charged on the present excessive costs.

That may be very arduous to finances for, not simpler. It results in the nightmare of not with the ability to afford to place sufficient cash onto a prepayment meter in January and February.

A chilly home isn’t good for anybody. If anybody in your own home has well being issues which might be made worse by the chilly – bronchial asthma, arthritis and many others – then it may be harmful. It could actually hurt your psychological well being. Chilly makes condensation, damp and mold issues worse.

In the event you suppose your provider is setting your direct debit too excessive, maybe as a result of you may be utilizing much less this yr, learn My vitality direct debit isn’t simply too excessive, it’s mistaken. It’s significantly better to attempt to get the DD set at a extra affordable degree than swap to a prepayment meter.

“Self disconnection” is rising

It’s extremely uncommon for anybody to have their vitality provide disconnected for arrears – lower than 10 individuals a yr. As an alternative suppliers transfer prospects onto prepayment meters. However in the event you don’t find the money for to top-up, the consequence is identical – chilly properties and distress.

That’s the reason Residents Recommendation calls prepayment meters:

disconnection by the again door.

In 2023 Residents Recommendation has been seeing file numbers of individuals in determined conditions. This kind of downside was confined to the winter, however all by way of the summer season, individuals have been in bother. Though the vitality costs have now dropped beneath final winter, the £400 assist with vitality payments in winter 22-23 has ended. So this coming winter except you employ extra vitality than common you gained’t see any enchancment in your payments, and low vitality customers shall be worse off.

Previous-style meters are a nuisance to high up

It isn’t all the time simple to get to a top-up level so as to add cash to a key or card.

You might have to journey a great distance, particularly in rural areas. The journey itself could value you cash, lowering what you need to add onto the meter. If you’re unwell or disabled, or you’ve caring duties, this makes it even tougher.

A sensible meter working in prepayment mode provides you extra choices as you may high up on-line.

You possibly can’t simply swap again from a prepayment meter

It’s possible you’ll be pondering, effectively I’ll give it a attempt to see the way it goes.

However some suppliers make it arduous to modify again from a prepayment meter. They could insist you need to repay any arrears first. And a few could ask you to pay a “safety deposit” to vary again.

Verdict – don’t ask for a prepayment meter!

In earlier years, some individuals discovered a prepayment meter a assist with their budgeting. However now the large enhance in vitality costs means the issues now outweigh the comfort of easier budgeting.

That is not a smart possibility for many… and for some with well being issues it could be actively harmful.

So you need to be VERY positive it is a good transfer for you earlier than you ask to be switched to prepayment. Simply pondering it could assist a bit with budgeting isn’t a very good purpose to take such a giant step which can be arduous to reverse.

That is the primary in a sequence of articles taking a look at prepayment and sensible meters.

The subsequent articles are“Ought to I get a wise meter?”and 9 sensible steps to keep away from having a prepayment meter.