Are there electricity companies with no deposit?
If you’re looking for an energy provider and wondering about no-deposit plans, you’re not alone. The majority of plans from retail electric providers (REPs) require a deposit, often adding up to hundreds of dollars, especially if your credit score is less than perfect. And for many Americans, that can cause big problems.
While it is true that the REP usually refunds this amount, plus interest, after 12 months if payments have been made regularly, that doesn’t help those strapped for cash today.
So, is there an alternative? Well, some providers offer no-deposit plans, but what does this mean and are they a good idea? Let’s look at what’s involved.
What is a no-deposit electricity plan?
Not all electricity plans require a deposit. If you have a very good credit score, some electricity providers will waive the deposit when you start your contract, but that doesn’t help many people. Nearly all REPs will do a full credit check before you sign up with them, and that’s how they decide whether or not you will be required to pay a deposit and how much that will be. The actual amount will be affected by your expected usage.
Luckily, there is another option – the no-deposit electricity plan. This could be the best option for those who have poor credit and find a deposit difficult to come up with. The added benefit is that no credit check is required for this sort of plan. It usually involves paying for your electricity upfront each month, so the provider doesn’t need any payment guarantee as there is little risk involved. If necessary, you top up your account if you find you are using more power than normal.
Why choose a no-deposit electricity plan?
- No-deposit: There is no-deposit required, and you don’t have to come up with potentially hundreds of dollars to secure your electricity supply.
- No credit check: A credit check can lower your score by around five points, so if your score is already less than optimal, it can be a good idea to avoid a check if possible.
- No long-term contract: You don’t have to tie yourself to the same REP for an extended period. That means you can look for a better deal more quickly.
- Fast connection: Because you pay up-front on a no-deposit plan, you can often get same-day connection.
- Usage alerts: When you are getting close to your period limit, the power provider will let you know that you need to top up your account. This means you will be more aware of how much energy you are using and be in control.
How do no-deposit electricity plans work?
If you have a very good or even excellent credit score, you may find a REP that won’t charge you a deposit, but that is often not an available option. Most electricity providers demand a deposit of some sort for the vast majority of their new customers.
Generally, a no-deposit plan works on a prepayment system. It is similar to the way you finance a prepaid cell phone. Once you have opened an account with a supplier, you simply pay a sum of money into it, which should cover your monthly energy cost. Usually, the REP will give you regular notifications about your usage and notify you if you are getting close to your limit. You then top it up.
This sort of prepayment plan is fast to set up and simple to manage. You can understand exactly where your money is going and be in control of your electricity usage.
What are my options for getting no-deposit electricity?
Prepaid utility service is common in many countries. In the UK, for example, it is estimated that 13% of customers use a prepayment method for their electricity, and it is also popular in Australia and New Zealand. However, it is comparatively rare in the United States.
As the electric supply for more states becomes deregulated, so the opportunities for no-deposit plans become greater. Texas is leading the way, and there are many REPs in that state that offer plans that don’t require a deposit. As more states join the trend to deregulation, the option of having a prepayment plan will grow and become more common.
This trend is being led by electric cooperatives and offers a real chance for those on a low income or going through a tough economic situation to regularize their electricity supply.
However, not all these prepaid plans are no deposit, though that deposit tends to be relatively affordable. Let’s take the SRP M-Power plan that operates in Arizona, for example.
They install a special meter and give the customer a display box in their home. This means the user can see exactly how much electricity they use and how much is left on their prepaid plan. When their reserves are low, they can top them up. This can all be done on a smartphone via the company’s app. If needed, they will also send out notifications, texts, and emails to help manage your account.
The advantages for the consumer are many:
- Flat-rate pricing removes much of the mystique surrounding energy tariffs.
- The home display means that power consumption can be monitored in real-time, as can the balance of the account and when you will need to top-up.
- There is usually a choice about whether you pay via an app, your bank account or even with cash.
- Notifications keep you in on top of the situation.
- Customers on this sort of plan often reduce the rate at which they use electricity.
The M-Power plan does require a deposit; however, this is only just over $100 and is refundable. They also charge a couple of other fees, including a $20/month plus tax service fee. A service fee is common on every plan.
The SRP M-Power plan detailed above is typical of non-deposit and prepaid plans available throughout the country. The only disadvantage of these plans for many is that they tend to cost more than normal plans that require a deposit. For this reason, it may be better to prioritize a change from a no-deposit prepaid plan to a regular plan as and when your situation changes.
Do all electric companies require a deposit?
Virtually all electric companies require a deposit. It is their way of covering the risk of a new customer failing to keep up their payments. There are exceptions, particularly in those states that have deregulated electricity supply.
What electric companies do not require a deposit?
Normally, most plans provided by the majority of retail electric providers need a deposit. It is their way of covering the risk of a new customer failing to keep up their payments. The exceptions are:
- When your credit and payment history are perfect. Even with an excellent credit score, if you are a new customer of the energy provider, you will likely need to pay a deposit.
- Or you can provide a signed letter from a guarantor who is already a good customer of the REP concerned.
In some states, though, electricity providers are prepared to offer no-deposit plans to some customers. Even if a deposit is required, this can be quite low and perhaps paid in two or more installments to make it as affordable as possible.
If you’re looking for a no-deposit plan, it’s best to do a search for local options, as it varies significantly state-by-state, and there may be local help nearby to help you secure your power supply if you have experienced financial trouble in the past.
If you live in a state where Inspire is available, signing up for a clean energy membership with us is another great option. You can get the power supply you need for a fixed monthly fee without having to worry about unexpected bills. To find out more, click here.
Does a no-deposit electricity plan require a credit check?
Few, if any, prepaid no-deposit electricity plans involve a credit check because they understand that you likely don’t have a great credit history if you're looking for one.
Our clean energy plans don’t require a credit check because there is no long-term commitment. You simply pay your monthly fee and cancel at any time. Click here to learn more.
How soon will my power be turned on after signing up for a no-deposit electricity plan?
This is another advantage of prepaid no-deposit electricity plans. In most cases, you will have electricity the same-day or within hours. Electric companies can move very fast to connect you once you have opened an account and added some money.
While it is possible to get electricity with a no-deposit plan, it is not a given, and there is a cost. Most plans offered by light companies with no-deposit are expensive because, as far as the REP is concerned, it is taking a risk.
We believe the best option for electricity supply is with us. With Inspire, you get a flat monthly subscription, so no surprises when the bill hits your inbox. You are guaranteed clean, renewable energy and are helping improve the world’s environment and reduce the carbon footprint. With Inspire’s help, you can produce a home with net-zero carbon emissions and create a better planet for generations to come. To find out more, click here.