Repeat payments, also known as recurring payments, are a huge payment tool that can dramatically improve your business. They can save you time and increase your customer experience quality. A wide variety of companies can take advantage of recurring payments. It also offers a more reliable form of payment when compared to ACH. Finally, it’s vital that you understand how to avoid the risk of chargebacks that comes with recurring billing.
Basics of Repeated and Recurring Payments
Using a payment processor along with your merchant account allows you to conduct recurring billing on repeated occasions. You will need customers to sign a one-time authorization form to allow you to charge their credit cards. This gives you the ability to charge them when you need to.
The actual process for recurring payments is simple. First, the customer will authorize you to store their card information. Then, after storing their card information, you will be able to initiate a payment. Your processor should allow you to automate this portion of the process.
The fees for recurring transactions will be similar to other regular credit card transactions. These can range from 1% to over 3% per transaction. Recurring billing typically operates on a weekly or monthly basis. But you can choose a repeated interval that works best for your business.
There are different types of repeated payments. Fixed payments are payments in which the amount charged remains the same across transactions. Variable payments are payments in which the amount charged can vary, as is the case with utility bills.
Businesses that Use It
A wide variety of businesses can take advantage of recurring transactions. For example, service businesses, education services, subscription services, and various online services benefit tremendously from recurring billing. All of these businesses require your customers repeatedly, and recurring billing makes this much more manageable.
Benefits of Recurring Billing
Providing recurring billing can quickly boost your customer retention rate as you automate the billing process and make it very convenient for customers. Automated repeated billing allows you and your customers to save time, not having to input payment information over and over. It also provides you with a predictable income stream. Customers are also guaranteed to have nonstop service as you automatically collect payments.
Recurring billing also gives you an easy way to analyze what services your customers enjoy and which ones they do not. This valuable analytical tool means you can change and customize your company to suit your customers’ needs better.
Advantages over ACH
The advantage of recurring billing using credit cards is that you have a higher chance of guaranteed payment. As opposed to ACH payments, you must ask permission for the transaction with credit card transactions. However, with credit cards you are guaranteed they are willing to pay when they give you their card information.
ACH transactions will also be canceled if there are insufficient funds in your customer’s bank account. Unlike credit card transactions, where payment is charged against the customer’s credit limit and real-time, further guaranteeing payment.
It also really minimizes the risk of late or missed payments that can cut into your profits. With your customer’s pre-authorization, you have predictable payments.
Avoiding Fraud and Chargebacks
The major downside to this repeat billing is the increased potential for fraud as the customer is not physically inputting their information for each transaction. Because of this higher risk, payment processors will charge higher rates for these transactions. With some processors, this could cut into your profits. Some processors charge over 3% plus 10 cents to 50 cents for these recurring transactions.
How to Mitigate Chargebacks
Changes in customer preferences can derail your recurring payment system. For example, customers decide they no longer wish to pay their subscription and will try to use their bank to get their money back. Other times customers forget to cancel a subscription after they stop using your service. Some may change their minds after the first time they are billed or may become frustrated with your subscription cancellation process.
The first step you can take to avoid these chargebacks is to ensure complete transparency with the customer before you process the first transaction. This way, you can prevent customers who, upon realizing your terms, would initiate a costly chargeback. Additionally, there is an increased likelihood that the customer will contact you directly if you are transparent.
If they know you are honest, they are more willing to work with you to sort out a payment issue rather than initiate a chargeback. Another common problem with recurring billing with credit cards is when the card on file is canceled or expires. Fortunately for you, credit card networks have developed networks that allow you to request updated credit card information instead of having to repeat the initial information-gathering process.
Chargebacks also occur when you try to run a declined card repeatedly. Only run a declined card at most four times, as these repeated attempts can lead to a costly chargeback. This can differ depending on the credit card network. For example, with Mastercard, you cannot repeat this process as it only allows you to process certain transactions once.
You also can implement a resubscription feature to allow customers to repeat the recurring billing process if there are any issues with the transaction.
Repeated Payments with Payline
With Payline, you can implement a robust system that automatically charges your customers for your services. This way, you can avoid having to repeat the full payment process every time. A central goal of our business is to make our payment processing as convenient as possible for both you and your customers. Whether it is a debit card, recurring credit card, or repeated ACH payments, we provide solutions for various payment options.
Another advantage of working with Payline is that we offer incredibly competitive pricing. While many processors will charge over 3% per transaction, we only charge 0.75% + 20 cents per transaction. We want your business to succeed as much as possible rather than squeezing you for every last cent.
Assisting with security and fraud prevention is another central goal of Payline. We meet the highest standards of PCI compliance and security. We also emphasize transparency to ensure you have the information you need to process payments. This information can assist you with providing customers with adequate assistance and avoid the potential for chargebacks that comes with recurring payments.