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Is A Prepaid Electric Plan Right For You?

If you're like the other 40 million plus people in America struggling with bad credit, then you probably know how challenging it is to get an account with a local electric company. Many times, the company will want you to put down a large deposit to help mitigate the risk of possible default. If you can't afford to pay the deposit, you may be able to avoid this requirement altogether by signing up for a prepaid electric plan. Here's more information about the option.

What is a Prepaid Electric Plan?

A prepaid electric plan operates exactly like other types of prepaid accounts; you must pay for your electricity a month in advance. The electric company will charge you a monthly fee based on the estimated number of kilowatt hours you will use for that month and the current electric rates. This may be a standard number the company uses for all prepaid plans, or the estimate may be based on the usage history of the place where you're living. Some companies allow the customer to choose the amount to purchase. Regardless, as long as you pay the fee each month, you will enjoy having electricity.

The Pros and Cons of Prepaid Plans

The primary benefit of a prepaid plan is you won't have to put down a deposit. Therefore, you'll be able to get the lights turned on in your home as long as you have enough money for the first month's bill. Another benefit is you won't be subjected to a credit check, and some electric companies don't even require identification to start service, so don't have to worry about getting a negative mark on your credit report if you fail to make a payment.

However, the biggest disadvantage is that, if you don't make the prepayment, your electricity will be turned off. This is also true if you use more electricity than you paid for. Typically, the electric company will notify you ahead of time when you're getting close to your limit, and you'll have to pay for additional kilowatt hours of electricity if you think that you'll need it or face disconnection.

Another disadvantage is a prepaid account doesn't give you an opportunity to establish good credit with the electric company. If you put down a deposit and get a regular account, you'll have the opportunity to build a track record of on-time payments that may result in you being refunded your deposit or negating the need for one in the future. This option is generally not available with prepaid accounts.

A prepaid electric plan is an ideal solution if you're not able to come up with a requested deposit before you need the electricity turned on or you don't have proper identification. You can even use it as a jumping off point and save up the deposit needed to switch to a regular account. For more information about prepaid plans, contact your local electric company.