Milvionne Chery Copeland, Writer
@milvionne_copeland
Budget billing is better if you are looking for more consistent monthly billing to smooth out seasonal increases in your utility bills. However, if you are looking to pay the same price every month regardless of how much of the service you use, then flat billing is better.
Both budget billing and flat billing offer ways to make your utility bills more predictable and avoid the surprise increases common with regular billing, which charges you for your actual usage every month. There are key differences, though, so it’s a good idea to research the details of each option to determine which one is better for you.
Budget Billing vs. Flat Billing
| Category | Budget Billing | Flat Billing |
| How it works | You pay a fixed amount based on your average usage over the past year | You pay a fixed amount that doesn’t change regardless of your usage |
| Required to pay for extra usage? | Yes | No |
| Contract required? | Not usually | Usually |
| Biggest pro | You avoid seasonal bill increases | You pay the same amount no matter how much you use |
| Biggest con | You may have a balance to pay at the end of the year | You could pay for more than you use |
How Budget Billing Works
With budget billing, you pay a fixed monthly amount for utilities, such as electricity and water, based on your average usage over a specific period, typically a year. The utility company then keeps track of your usage throughout the year. At the end of the year, if you’ve used more than expected, you will have to pay the difference.
How Flat Billing Works
Flat billing works very similarly to budget billing, with the utility company offering you a fixed monthly bill based on your usage in the prior year. The main difference is that you will not accrue a balance that you have to pay if you use more than the plan expected.
Pros and Cons of Budget / Flat Billing
| Category | Budget Billing | Flat Billing |
| Pros | 1. Provides predictable monthly bills 2. Avoids seasonal increases 3. Allows you to cancel anytime | 1. Provides predictable monthly bills 2. Avoids seasonal increases 3. Allows you to pay the same amount regardless of usage |
| Cons | 1. Will not save you any money 2. Extra payment might be required after high usage 3. Not offered by every utility company | 1. Might not be a good deal if your usage is low 2. Requires a contract 3. Not offered by every utility company |
Both types of plans offer you predictability since your bill will be the same amount from month to month. This allows you to avoid seasonal increases due to an uptick in usage during the summer and winter months.
An additional benefit of flat billing is that it allows you to use as much of the service as you want since you will not be charged the difference if you use more than anticipated. However, you must sign a contract to keep the plan for a specific amount of time, and you could end up paying more than you would normally if you don’t use a lot of energy.
With budget billing, you can cancel your plan anytime you want, but if you use more of the service than expected, you will have to pay the difference at the end of the year. You might even have to pay that balance in one lump sum.
It is important to note that not every utility company offers budget or flat billing, and very few offer both. To learn more, check out WalletHub’s guide on whether budget billing is worth it.
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