1 April energy price drop: what's the best way to pay for energy now?

Paying by a monthly direct debit is the most popular way to pay for energy. It's hands-off, you pay the same amount each month and you usually have access to cheaper tariffs. 

But under the price cap for variable tariffs set by energy regulator Ofgem, prepayment, or pay-as-you-go, rates will be the cheapest price-capped option from 1 April. 

That's thanks to a change in the way Ofgem calculates standing charges – previously prepayment customers have had to pay more due to the increased administrative costs of this type of energy supply, but these higher costs disproportionately impacted low-income households, and they have now been rebalanced against those paid by direct debit customers.  

More on: The energy price cap from 1 April 2024 

So should we all be switching to pay-as-you-go to make the most of lower rates? Probably not, as we'll explain below. But if it's a payment method that suits you, you won't be charged more for it than direct debit customers from Monday's price change.

New rules also mean you'll be able to switch energy supplier faster from 1 April – the transition should now take just five working days. With fixed tariffs starting to return, this might become more relevant for more people in coming months. 

If you're on a tariff with rates that are dropping on 1 April, you pay by direct debit and you have a traditional meter for which you need to submit manual readings, don't forget to do so on or close to the changeover date, to make sure you're paying the cheaper rates for energy used once the price change kicks in.

Below, we weigh-up the pros and cons of each way to pay your energy bills.

Thinking of fixing an energy tariff? See our table of the current cheapest deals and other interesting options in our guide to how to get the best energy deal.

Paying for energy by prepayment: Are energy prepayment meters more expensive?

In the past, prepayment was the priciest way to pay. But in recent years, prepayment customers' bills have gradually been brought in line with those who pay by direct debit.

Around four million households prepay for their energy. Some gas and electricity suppliers - including Boost, E and Utilita - only supply customers with prepayment meters.

Traditionally, you needed to make sure you could get to a local shop or post office to top up your meter when you needed to, but if you've got a smart meter you'll be able to do this remotely using an app or online account.

Pros:

• Cheapest price-capped rates per kilowatt hour of gas and electricity between 1 April and 30 June. Daily standing charges are now the same as direct debit customers.
• Paying for what you use as you use it can help with budgeting.

Cons:

• Very limited choice of fixed tariffs compared with other payment methods. Historically, fixed tariffs have been cheaper than price-capped rates so you risk missing out on the best deals as the market reopens.
• You'll need to get used to topping-up your meters. Some suppliers let you set automatic top-ups but, if you don't have a smart meter, it can also mean phoning up or going to a shop to top-up.
• You may need to pass a credit check if you want to change how you pay.

Prepayment is worth considering if: you want the current cheapest price-capped rates and are happy to switch again if direct debit deals become cheaper. You'll also need to be able to top-up your meter.

Read more: is a prepayment energy meter right for you?

Paying for energy on receipt of a bill: Can you still pay when you get an energy bill?

Yes, you can still pay for the energy you've used each time you get a bill, but you have to pay more for the privilege. 

Before direct debit payments came into play, this was a popular payment method. You may also see it referred to as bill pay or standard credit.

Pros:

• You only pay for energy after you've used it - you won't build up any excess credit in an account with your energy provider.
• A bigger choice of fixed tariffs than prepayment.

Cons:

• This is by far the most expensive way to pay for gas and electricity under the price cap. A typical household will pay £106 more per year compared with direct debit payments.
• A smaller choice of fixed tariffs than if you pay by direct debit.
• You'll get much bigger bills in winter when you're using more energy.

Bill pay is worth considering if: you don't want to pay for your energy in advance or build up credit with an energy provider, and you don't mind paying extra for this method.

Read more: Different types of energy tariff explained

Paying for energy by direct debit

Direct debit payments are the most common way to pay your gas and electricity costs. Some energy companies only offer this way to pay.

Pros:

• The biggest choice of fixed tariffs, which have historically been cheaper than the price cap. You can currently save £100 more than the price cap with a fixed deal.
• Your energy costs are split equally across the year, so you won't face big bills in winter.
• Payments are taken automatically so you don't need to remember to pay your bill when it arrives.

Cons:

• Priced-capped direct debit tariffs cost around £47 more per year than price-capped prepayment tariffs.
• You can build up excess credit in your account if your direct debit is set too high (though you can claim this back or reduce your payments).
• Your direct debit might need to increase if it's set too low.

Direct debit is worth considering if: you'd like to spread your energy costs across the year, prefer not to have to remember to pay your bill each time it comes, and have access to a greater choice of fixed tariffs, which are often cheaper.

Read more: the best energy suppliers for 2024

Switch energy supplier faster

In recent months it has typically taken six days to switch electricity supplier and 17 days to switch gas supplier, according to data from energy regulator Ofgem.

But from 1 April, suppliers will have to complete your switch within five working days. 

Its new rules state that if this doesn't happen, you're entitled to £30 compensation. 

This should be automatic. But if you don't get it, remind your supplier that it owes you.

Read more: What you need to know about how to switch energy supplier