With an advanced payment energy plan, you pay for your energy upfront in return for a fixed discount. This is a similar concept to paying for your car insurance upfront as opposed to monthly. Advanced payment plans will be cheaper than a standard energy plan, but they do require you to part with money upfront.

While you can’t choose whether or not you pay for your energy, when it comes to how you pay for your energy and electricity and gas, you have a few options. Those options are Direct Debit (monthly, variable or quarterly), cheque or cash, and advanced payments.

We recently received a question about advanced payments, so we thought we’d write an article about them to help you decide whether or not advanced payment energy plans are right for you.

What are Advanced Payments?

Advanced payments are, to be honest, quite rare in the energy industry.

They require that you pay for your energy upfront, in return for a fixed discount. That discount is usually around 5%, or £25 for every £500 worth’ of energy you consume.

What are the pros and cons of Advanced Payments?

Advanced payments are rare, and there’s a reason for that; the disadvantages outweigh the advantages. There are two key advantages to advanced payments:

1) You will know exactly how much you are going to pay for your energy, and;

2) You will receive a fixed discount on your energy, so you will see savings immediately.

Often, that fixed discount will be enough to guarantee your prices remain lower than your supplier’s standard rate. However, herein lies the main disadvantage of Advanced Payment energy plans; they often mean your energy will work out cheaper, but not always.

Related: Can I apply for the Government Home Discount if I switch my energy supplier?

The reason for this is simple – the discount you are offered is always based on the standard rate of the supplier, so no two discounts will be the same. So if you choose a supplier with a high standard rate, then your discount won’t work out to be as lucrative as you think.

The second and third disadvantages to advanced payments are rather sneaky – the second disadvantage is that some suppliers do not have policy in place that guarantees reimbursement, should you choose to switch to another energy supplier, or cancel your agreement early. So you should always make sure that your supplier will reimburse you with any outstanding credit, should you choose to switch supplier or cancel your agreement.

Lastly, but perhaps most importantly, when your plan runs out you will be automatically reverted to your supplier’s standard plan. This will almost certainly be more expensive over the same term.

The good news is you can switch to another supplier who accepts advanced payment and offers a lower standard rate. Hopping from one supplier to another, so long as it works out cheaper for you, is the best way to approach advanced payment energy plans.