Posted in Membership Website Tips	May 25, 2006

Recurring billing has been around almost as long as credit cards. You probably take advantage of some type of recurring billing to make utility, Internet hosting, cable or insurance payments.

Exactly What is Recurring Billing?

When a customer agrees to have a specific charge card billed a certain amount for a pre-determined (or sometimes open-ended) period of time, that's recurring billing. It's sometimes called recurring payment or subscription billing. Bank accounts and debit cards can also be billed recurrently. Common time frames are monthly and quarterly.

Subscribers like recurring billing for several reasons. First, they can essentially finance a subscription, making a payment each month. Second, they can commit for a shorter period of time, allowing them to evaluate the service or publication before subscribing for a full year. And third, it's a convenience—one less bill to pay each month or quarter.

You can offer recurring billing in several ways. Without customer participation, open-ended
This is sometimes referred to as 'til forbid.' When the subscriber initially signs up, he agrees to allow an automatic charge to a credit card each month, unless and until he contacts you to unsubscribe.

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Without customer participation, limited time
When the subscriber signs up, he agrees to allow an automatic charge to a credit card each month for the next six months, unless he contacts you to unsubscribe. At the end of the six-month period, he receives a standard renewal notice.

With customer participation
Each month, the subscriber receives an email notice for renewal. The subscriber links to the indicated payment page, fills out the credit card information and is renewed for another month. This is not the most popular form of recurring billing, as the convenience factor is greatly diminished, and the renewal rate is greatly reduced.

Potential Problems

Online publishers who use recurring billing claim the option dramatically increases income. However, there are a few potential headaches to consider before you decide to offer this option.

Declined cards
If you don't follow up each uncompleted or declined transaction with an email or phone call, the customer and income are lost.

Chargebacks
When a customer disputes a specific charge to their card, banks automatically refund the purchase price and deduct the amount from your business bank account. You have the opportunity to prove that the transaction was legitimate, but this is often difficult where Internet transactions are involved. And banks will close your merchant account for excessive chargebacks. (Check your merchant account agreement for details.)

Customer complaints
If your customers are not fully aware of the recurring billing terms, you will get complaints, which can chew up your valuable time to resolve.

Copyright infringers
It's a sad fact of life, but some people steal other people's material. This is especially easy to do on the Internet, and there is no convenient, cost-effective way to prevent it.

Recurring billing offers the perfect opportunity for unscrupulous individuals to subscribe to your site, pay the first month or two, and then cancel the subscription. During that time, a single thief can copy all your articles and download any available PDF or other file, then easily duplicate the material and sell it under his own byline.

If you publish the type of content that might appeal to such low-life charlatans, weigh the pros and cons carefully before you offer recurring billing.

An Ounce of Prevention

Many recurring billing problems stem from poor communications or when the online publisher and/or the subscriber have little experience in recurring billing. Review your site's ordering system with the following in mind:

• Double check your subscription application form, making sure it is easy to understand how to opt for a recurring payment versus a single yearly payment.

• State your site's recurring billing terms in normal-sized print, on the subscription application form.

• Also state the merchant name that will appear on the credit card billing statement. Ideally, your merchant account name matches your business name, which matches your site name, so the subscriber can easily identify the transaction.

• State your return and refund policies in a prominent location.

Finally, recurring billing demands a pristine, fully bullet-proof payment processing module for your subscription site software. Gateways and merchant banks have perfected the system, and most of them support recurring billing.

You have to make sure it works flawlessly on your end, however, to profit from the recurring billing option.

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