Prepaid plans work well for some energy customers, but they aren’t for everybody. Here’s an overview of who can benefit from pay-as-you-go lights — and who may want to think twice.
Who should get prepaid electricity?
Prepaid electricity is typically a good option for customers with lower credit scores. However, there are also other scenarios where a prepaid light company might be the best choice:
- Families with limited credit or utility history. If you already have a limited credit history, then running a credit check may not pose any benefits to you. A prepaid electricity plan can help you build up your payment history to make it easier to get approved for better plans in the future.
- Anyone trying to budget for electric services based on energy consumption. Since you pay for what you use with a prepaid energy plan, it can incentivize you to use less energy and budget accordingly.
- Families or individuals who plan to move soon or move often. If you’re constantly on the go, having prepaid lights can help you avoid frequently starting and stopping fixed-rate plans with energy providers.
Who should not get prepaid electricity?
Prepaid plans are great if you don’t want to pay a deposit or if you don’t have great credit. They allow you to know what you owe in advance and manage usage as the month progresses. But there are also some downsides. You may not want to prepay for energy if:
- You don’t want to pay in advance. If you’re already worried about paying a deposit, this might not be a good choice, as this energy plan type requires you to have the appropriate funds ahead of time.
- You don’t want to tie up money in a minimum account balance. If you frequently find yourself needing more electricity than you paid for, this could become a problem. You may be better off choosing a plan that better accommodates your energy needs.
- You want to keep your rate as low as possible. While prepaid electricity plans don’t include early termination fees to keep you from switching before a contract ends, rates are often higher than traditional plans. If you don’t anticipate switching plans before the end of your contract, a fixed-rate plan may work better for you.
Despite these drawbacks, prepaid electricity plans are beneficial to many because they don’t tie up funds in a huge deposit that isn’t going toward monthly energy costs. Customers with a tight budget can manage their energy usage to keep costs down.