What is a prepayment meter and does it cost more than paying by direct debit?

Full answer

Prepayment meters remain common in the UK, particularly among tenants and households that have previously built up energy debt, but they work quite differently from standard credit meters. **How prepayment meters work** Instead of receiving a bill after using energy, you pay in advance -- topping up credit via a physical key or card at a shop or PayPoint terminal, or increasingly through a smartphone app for smart prepayment meters. Your usage is deducted from this credit in real time. If your credit runs out and you have not topped up (and are not on emergency or friendly-hours credit), your supply will be disconnected until you add more funds. **Cost compared with direct debit** Ofgem's energy price cap sets a maximum unit rate and standing charge separately for each payment method -- prepayment, direct debit, and standard credit (pay on receipt of bill). Historically, prepayment tariffs have often been priced similarly to or slightly higher than direct debit under the cap, though the exact relationship between payment-method caps can change each quarter as Ofgem updates the cap -- always check the current quarter's cap rates for your specific payment method, since prepayment is not automatically cheaper. **Self-disconnection risk** A key risk of prepayment meters is "self-disconnection" -- running out of credit and being left without gas or electricity, particularly over evenings, weekends, or when top-up shops are closed. Vulnerable customers, including those with children, disabilities, or health conditions relying on powered medical equipment, should tell their supplier, as additional support and safeguards may be available. **Switching away from a prepayment meter** If you have previously had a prepayment meter forcibly installed due to debt, you may be able to request a switch to a standard credit meter or smart meter once the debt is repaid or a repayment plan is agreed with your supplier -- suppliers are subject to Ofgem rules restricting when they can force-fit prepayment meters, particularly for vulnerable customers. **Practical tip** Use the Energy Bill calculator to compare your likely costs across payment methods, and always keep some emergency top-up credit in reserve, particularly before weekends or bank holidays when shops may be closed.

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