what is recurring billing 
recurring billing happens when a merchant automatically charges a customer for goods or services on a prearranged schedule recurring billing requires the merchant to get the customer s information and permission the vendor will then automatically make recurring charges to the customer s account with no further permissions needed any good or service that a customer subscribes to with regularly scheduled payments might be a good candidate for recurring billing examples include cable bills cell phone bills gym membership fees utility bills and magazine subscriptions recurring billing may also be referred to as automatic bill payment understanding recurring billingrecurring billing offers the benefit of convenience instead of having to provide billing information for a routine charge repeatedly the customer can authorize the merchant to keep payment details on file then the merchant can charge the designated account each month that service is in effect or each time that the agreed upon goods or services are delivered it is typically up to the business provider to decide on the options for payment some providers require that checking or saving accounts be used while others allow for checking savings and credit card accounts example of recurring billingconsider the example of a customer and a pet store the customer sets up an order with an online pet store to have three bags of dog food delivered every three months authorizing recurring billing would let this purchase happen automatically on a regular three month schedule with a charge to a designated credit card other examples where recurring billing is often used include electric bills phone bills and internet services many companies offer a small monthly discount to customers when they sign up for recurring billing this helps to lower some of the risks of any missed payments types of recurring billingin fixed or regular recurring billing the same amount is collected from the customer in every payment cycle companies that provide services for a fixed price typically use fixed recurring billing for example a gym membership is an example of fixed recurring billing if you subscribe to the new york times or any other newspaper you are billed using fixed recurring billing for a business this model provides stable and continuous revenue the terms subscription billing and recurring billing are often used interchangeably these models are similar both subscription and recurring billing involve an automatic payment system storage of customer s payment information and periodic withdrawal of credit from the customer s account the main difference between the two models is the pricing plans subscription businesses can have multiple pricing plans while it s not necessary for there to be different tiers of pricing in a recurring billing model the billing mechanism remains the same in variable or irregular recurring billing the amount collected from the customer might change in every payment cycle depending on the customer s usage of the product a new dynamic bill is created for each cycle usage based billing is a type of variable recurring billing where a customer is recurrently charged based on their usage of the service utility bills are a common example of usage based billing quantity based billing is another type of variable recurring billing with this model customers are billed based on a quantity that was agreed upon when they purchased volume based cloud storage services are one example of quantity based billing advantages and disadvantages of recurring billingone drawback of recurring billing for consumers is that it can be troublesome to correct a billing error instead of receiving a bill noticing a mistake then refusing to pay the bill until the mistake is corrected the consumer may be automatically billed for the incorrect amount requiring additional time to obtain a refund thus it is safest to agree to recurring billing for payments that are always about the same amount and occur on a predictable schedule because you re more likely to quickly notice any billing errors recurring billing can also lead to overlooked expenses for customers who forget about the charges some people will pay their credit card bills without reviewing each listed charge they could be paying for a service they no longer require or didn t even know they were getting recurring and automatic billing is also pointed to as the source of scamming seniors moreover in some cases recurring billing can lead to halted services if an account is declined when recurring billing is used it can be important to tie it to a major checking account or savings account that carries a high balance any interruption in service due to a declined charge can be problematic for a customer many services only allow customers to sign up if they agree to recurring billing for example virus software and credit monitoring service agreements often require the customer to agree to be charged for the service periodically they require the customer to cancel the service or it will continue indefinitely in this way recurring billing can help merchants with customer retention recurring billing has several other benefits for merchants it ensures prompt payment from customers helps with cash flow lowers billing and collection costs and automates a portion of accounts receivable it can also improve customer satisfaction by making it more convenient for the customer to do business with a company however recurring billing doesn t eliminate all administrative tasks for example merchants will need to contact consumers about updating their payment information if a credit card expires or a credit card issuer declines an attempted recurring charge merchants that offer recurring billing usually make it easy for consumers to manage their billing information and preferences online many merchants use sophisticated systems to help them manage all aspects of recurring billing a well designed system allows a merchant to automate invoicing and payment details for recordkeeping purposes most billing systems also allow a customer to easily check their account details change their payment information opt out of service before a free trial converts to a paid subscription or cancel an unwanted subscription for customers recurring billing can save them time too they only need to sign up and provide their payment information one time this can be a relief for customers because they don t have to make sure the bill is paid every cycle hard to correct billing errorseasy for consumers to overlook expensessource of scamming for seniorscan lead to halted serviceshelps with customer retentionensures prompt paymenthelps with cash flowlowers billing and collection costssaves customers time