(866) 509-7199
(866) 509-7199

How to Accept Recurring Credit Card Payments

Setting up recurring credit card payments for your customers is one of the most sustainable ways to ensure revenue growth. Turning a routine payment into one that automatically drafts on a schedule will help secure customers in the long term and reduce late and missed payments along the way. It’s the reason so many companies are moving to a XaaS (Anything-as-a-Service), a subscription-based model, and it’s worth leveraging for your business, too.

What Are Recurring Payments?

A recurring payment repeats automatically, meaning you can set it up to occur on a predetermined schedule — like once a year or the 15th of each month. Since a customer does not need to physically or virtually present payment, recurring payments are unique. They make revenue projection easier for you while convenient for customers and reducing the number of missed and late payments for your company.

To set up a recurring payment agreement, a customer will share their payment information, whether debit or credit card, with your payment processor and then authorize the payment amount and payment schedule. The payments may be yearly, monthly, weekly, or even daily, depending on what your business is offering. Recurring payments typically have an expiration date, but you can also set them to continue on ​the schedule until canceled.

Types of Recurring Payments

When setting up recurring credit card payments for your customers, you must first determine which type of recurring payment is ideal for your venture to use. The two main types of these particular payments are variable payments and fixed payments.

Variable payments may have different amounts due every time. In other words, the payment amount is subject to change from one payment to the next. Usage-based charges, like utility bills, are a good example of variable recurring payments. The agreement may have a cap or acceptable range limit. It may increase or decrease by an unlimited amount dependent on a certain variable (like how much water the payee consumes).

Meanwhile, fixed recurring payments are straightforward. A fixed recurring payment will be the same amount every time the payment comes due, which is common for subscription services, such as a monthly magazine. Fixed payments are predictable for both your customers and your finance department.

Of course, some merchants will also use some hybrid of the fixed and recurring payments approach. For instance, a cloud storage provider may charge a flat rate each month (a fixed payment) to each member’s tier and, if usage exceeds a certain amount, they may charge a variable amount, too.

Benefits of Recurring Payments

The list of benefits associated with recurring credit card payments is long. With recurring payments implemented, you can look forward to:

  • Greater Customer Satisfaction: Convenience is a big deal to your customers. No one wants to take time out of their day to call you up or log in to offer payment information. Recurring payments remove monotonous (and easily forgotten) to-do tasks from your customers’ busy schedules.
  • Fewer Late and Missed Payments: When getting paid relies on your customers to remember to log in and enter their payment information every year, month, or week; it’s easy for late and missed payments to add up. This results in hard-to-predict revenue for your company and more fees for your customers, a true lose-lose.
  • Reliable Revenue Projections: There’s a good reason so many companies are shifting to the subscription model — it makes reliable and sustainable revenue that much easier to project. When customers are paying you regularly, you always know how much money is coming in and when.
  • Opportunity for More Upsells: Offering a discount to customers who pay for a year upfront only adds to the above perks while increasing customer loyalty, too. Similar promotions also make it easier to upsell, growing your overall revenue and increasing lifetime customer value (LCV).

How to Set Up Recurring Credit Card Payments

If your business wishes to reap the benefits of recurring credit card payments, follow the steps below:

#1 Decide if Recurring Payments Are a Good Fit

Do your customers need to make routine payments to your business? If you offer memberships, subscriptions, or ongoing services (like utilities), recurring payments are probably a good fit for your business.

Retailers and businesses that don’t charge customers on a regular schedule probably won’t find recurring payments worthwhile unless they’re considering offering recurring services. For example, a clothing boutique isn’t a good candidate for recurring payments unless they plan to offer a monthly styling service or something similar.

#2 Figure Out Your Payment Type and Schedule

If you think recurring payments would benefit your customers, you need to determine the payment type to accept and a schedule your customers would agree to. Choosing between fixed and variable payments is typically the easy part, as you know whether your customers pay a usage-based or volume-based rate (variable) or a flat rate (fixed).

Meanwhile, determining how often you should charge your customers can be tricky, especially when you consider that charging them less frequently, like once a year, can help lock in customers and revenue in the long term.

Plus, you can often get customers to agree to a more infrequent payment schedule by offering a commitment discount, much like car insurance companies discount the policy when a consumer pays for six months upfront instead of opting for a smaller, once-a-month payment.

#3 Partner With the Right Payments Processor

Last but most certainly not least, implementing this for your business depends on you having the right payments processor by your side, one that can support recurring credit card payments conveniently and securely. You need a processor that’s ahead of the times and routinely implements the latest software and hardware. They should also offer personalized attention to each business they work with.

If you’re looking for a new processor, LOLA POS. may be just the one to partner with. Aside from enabling recurring credit card payments, LOLA POS provides tailored advice and assistance around the clock to help your business thrive. We can also help you unlock contactless payment terminals and so much more. LOLA POS is A Merchant Account That Works For You(™). Explore everything LOLA POS. has to offer you today.

I'd like to be a: