Recurring billing occurs when a merchant automatically charges a cardholder for specified goods or services on a pre-arranged schedule.
2/3 of households report using some type of automatic bill payment and recurring bill payment linked to a credit card is the most common type of auto-pay.
Automated billing is efficient, low cost, and helps generate a predictable, steady revenue for a business. Some examples of recurring billing include gym memberships, magazine subscriptions, and phone bills.
Steps to Setting Up a Recurring Payment
Payment providers make sure that recurring billing is easy to set up and inexpensive to manage. To set up, review the following steps:
- Choose a recurring billing application
- Acquire the customer’s permission for the repeated charge
- Enter the start and end date, payment frequency, and payment amount
- Enter the customer’s credit card information
- Review the recurring payment setup and then submit to your payment processor
- Continue to electronically send the customer monthly invoices of the payment
Cost of Recurring Billing
The cost of using a recurring payment system varies depending on the service provider you use. We recommend that you consider multiple payment providers to compare costs. You can also use a comparison website to analyze different company rates.
Recurring billing helps businesses save money because it does not require hardware that may need updates and maintenance.
Benefits for Merchants
Increase funds – Recurring billing ensures timely payments from customers, increasing cash flow because the customer no longer delays payments going into your merchant account.
Minimize overdue payments – Customers are less likely to miss payments with automatic billing.
Increased Security – Recurring billing systems allow merchants to securely manage customer information, reducing the circulation of sensitive information on paper.
Maintain customer relationships – Recurring billing turns a one-time payment into a long-term relationship.
Build customer loyalty – Recurring billing also promotes customer loyalty by encouraging an ongoing relationship with the merchant.
Benefits for Customers
Improve customer experience – The customer will know the exact amount they are paying per month, and payment plans typically make products more affordable.
Convenience – 45% of credit card users and 46% or debit card users use recurring payments because of convenience. Once the payment is set up, the customer never has to worry about missing payments or getting charged late fees.
With recurring billing, merchants no longer have to manually manage billing cycles and the transaction is guaranteed to end up in your bank account at the same time every month.
Recurring billing is simple to set up and will save you time and money, giving your business more room to grow.