There’s a lot to get wrong, and a lot to get right with payment options for your business. One of those is a recurring payment. We’re going to tell you all about the concept of recurring payment and by the end, you might just consider it as a suitable option for your business going forward.
Recurring payment definition
Recurring payments are regular payments customers pay to a company (usually either monthly or annually) for using their services or products. Recurring payments (or subscription payments, automatic payments, recurring billing) take place when customers authorize a merchant (that’s you) to charge them repeatedly for goods/services on a regular schedule (daily, weekly, monthly, or annually). This means a customer has given you permission to deduct payments for your goods/services from their bank account or charge their credit card in the amount due each month (or any other interval).
Recurring payments take place when customers authorize a merchant to charge them repeatedly for goods/services on a regular schedule.
If you’re a business that works with vendors and others, we recommend that you to offer this as a form of payment to your customers so that it’s easier to manage those financial payments and relationships. Easier and more convenient both for the customer and for you.
Types of recurring payments
Recurring payment may be one option to online payment transactions for your business, but it’s not a single entity. The recurring payment method comes in a couple of forms:
Fixed/regular recurring payment
A customer is charged the same amount every time, for example, a monthly magazine subscription or a gym membership. Customers are usually charged a fixed amount each and every time.
Because the price doesn’t deviate (increase or decrease) between cycles, this system is considered the most continuous and stable. You’ll stay at ease knowing that you’re going to receive your payments on time from customers.
Under this type, you’ll find:
You might be familiar with this if you’re also familiar with Netflix or YouTube, among others. Most businesses based on this model employ fixed amounts of payments each month. Commerce and software companies also use the subscription payment method.
Similar to subscriptions, membership payments also charge a fixed amount by month, with the occasional yearly option too. Commonly gyms, coworking spaces, professional organizations and others are the typical users of memberships.
Variable/irregular recurring payment
Payments change depending on the services/products provided or that customers use during the payment period. Examples of include your cell phone bill and electricity bill, which are based on your individual usage every month.
There’s always a known date when the customer is required to pay the charges that you as the company ask them. Of course, what’s different here is that their payments can alter depending on how much they use or buy from your service.
Automatic Bill Payment
As the name suggests, customers’ monthly/annual charges are automatically transferred to your company. Mortgages, credit cards, and utility bills often use automation for convenience and ease of maintenance.