Energy bills are an almost constant topic of conversation in many households and many of us need to try and keep a lid on our spending to ensure that our utility bills can be settled when they come in.


There is always a desire to save more if possible and one aspect that you could look at is whether it would be more cost-effective to be on a direct debit arrangement or maybe you prefer to pay as you go by using a prepay meter.

Understanding the difference

A good starting point would be to understand the fundamental differences between what it involves when you pay by direct debit as opposed to how a prepayment scheme works.

With a direct debit arrangement, you are being granted credit by your electricity or gas provider and benefitting from the fact that you are using the energy first and then paying for it at a later date.

In the past, many of us used to receive a quarterly bill and settle that when it arrived or shortly afterwards. As energy prices have risen and also because many household budgets struggle to cope with paying a large bill once every three months, direct debit spreads the cost and makes it easier for you to budget and balance your personal finances.

When you sign up to a direct debit arrangement, your energy provider will calculate what they estimate you will spend over a 12-month period and then work out a monthly amount that covers the estimated usage.

When you have a prepayment meter, you are doing what it says on the tin and paying for your gas and electricity in advance of using it. Prepaying means that you won’t have a large energy bill to pay every quarter and you can only spend what you have already paid in advance, so you will have to keep topping the balance up.

Difference in price

There are almost six million households in the UK using a prepayment meter so it is a widespread method but the main issue to consider is that there is plenty of evidence to suggest that you will pay more if you prepay than if you were on a direct debit scheme.

The energy suppliers like the idea of regular payments from their customers and this is why they generally offer the best deals and discounts in order to entice you towards signing up to direct debit.

Some people get into debt with their energy provider and sometimes they suggest a prepayment meter as a solution to not adding to the bill any further and repaying the outstanding balance by taking something from your balance every time you top up.

Check for deals

Even if you stay with a prepayment meter, make sure you check comparison sites to see whether you can switch to a cheaper provider rather than just accept what is already installed in your home.

If you can switch to a direct debit arrangement, it would almost certainly work out cheaper in comparison to a prepayment meter. Also take the time to compare the deals available, as it often pays to switch suppliers and review your existing deal regularly to see if you can cut your energy bills further.

Sarah Gould is a personal finance consultant, a property investor and ratepayer who lives just outside of London. She writes about all things finance for a selection of money saving and home owner websites.