Important Recurring Billing Features

In the previous article we described recurring payment types and payment schedules. In this one we will focus on specific recurring billing features and provide examples to illustrate how these features work.

More and more present-day businesses use recurring payments as the foundation of revenue model for their business. In recent years recurring payment industry has grown significantly. As it matured, it defined several features that are common and more or less standard for recurring payment solutions.
Availability of these features within a payment system makes recurring billing process more flexible and smooth for a business.

Freezing of a payment plan

Payment plan freeze is an ability to pause recurring billing schedule for one or more billing periods.


A person has a health club membership; he is going abroad for a business travel or vacation and is unable to use the facility for the entire month. Thus, a freeze is necessary to skip one month’s billing. In cases like this one, payment plan freeze is an essential feature of recurring billing process.

Deferment of payment plan

Payment plan deferment is an ability to defer the first billing date of a payment plan.


A business comes out with a promotional offer: “Pay $50 now and nothing for the next 3 months!” or “Pay $50 for the first 3 months and only $25 every month after that!” In such cases, at the time of signing the customer has the ability to defer the billing for the next 3 months.

Variable payment amount

This recurring billing feature determines the ability to specify different amounts based on a payment’s sequence number.


A common example would be a promotional offer where first three payments are half-price. Let us say, a business offers first 3 months of service at $25 a month and remaining months – at $50 per month.

Ability to change billing dates

Subscription-based businesses rarely change recurrence frequencies (for instance, monthly payments cannot suddenly be replaced by weekly payments). However, some clients like to realign their billing dates to make it easier to track their expenses.


A person originally signed up for the service on the 20th of the month (and is thus billed every 20th of the month). However, the person is paid by his employer on the 5th, and he would like his recurring payments to come out right after that on the 6th of the month.

Advance cancellation (Future cancellation)

There can be two ways to cancel a subscription. Either cancellation can be effective the very day or it can become effective at some point in the future. While most businesses allow immediate cancellations, some businesses require support for future cancellations, as certain customers might like to cancel their subscription to a service in advance and continue to use the service several weeks after the cancellation request was made.


A promotional offer lasts for 12 months, while in month 13 the price of the service increases, so the customer can arrange the service to be terminated after the first 12 months. Cancellation of an agreement requires physical presence of the customer at the facility. If the customer feels that he is not going to be around towards the end of the 12th month, he might want to do an advance cancellation several weeks before that. In such a case the ability to cancel the subscription in advance can be a handy option.


Pre-payment is the ability to make a payment against a future recurring payment, so that the future recurring payment doesn’t happen.


A tanning salon customer, who uses a credit card as a regular form of payment, maxed out the monthly credit limit. She knows that the next recurring payment is not going to go through, so she comes in and pre-pays it in cash.

Support for buy-out

This recurring billing feature is applicable to term and roll-over agreements, where there is a commitment to specific number of payments, and the payment plan has an overall fixed value. Some companies, especially those dealing with loans and personal or business credit, may offer an option for an early repayment.


A customer signed a 12-month agreement, at $100 a month; the total value of the agreement is $1,200. However, if this customer is willing to pay in full on the 3rd month, the company may be willing to discount the remaining payments by 15 per cent.

Support for service fees

Service fees under consideration include late fees, decline fees, cancellation fees. In some cases businesses need to surcharge service fees, and it is always convenient when the fees can be preset and automatically applied by the system when a certain event occurs.


For example, if a customer’s card got declined and no payment was made for 15 days, $15 late fee is automatically assessed.

Support for customer alerts and notifications

The feature under consideration means an ability to send out e-mail or printed letter notifications based on some events within recurring billing life-cycle.


Some businesses prefer to notify their customers before the charge occurs. Most businesses need to notify their clients when decline happens or when a card is about to expire and new payment information is required. Some businesses like to send out a welcome letter in which they define the descriptor of the transaction as it is going to appear on the cardholder’s statement.

Automated write-off

When people use uncommitted schedules, unlimited plans or rollover plans in their rollover phase, there is a common practice of automatically writing off the account after several months of unsuccessful billing. The account gets closed and invoices are written off. This recurring billing feature is especially relevant if the outstanding debt is uncollectible (or difficult to collect) and the amount is not significant, so it is not worth trying to collect it.


An example might be a low-cost pay-as-you-go gym membership at $10 a month. After the recurring payment gets declined for 3 months it might be easier for the gym to write it off and deactivate the account than try to get the person to pay the balance.

These were the key recurring billing features to be considered by a subscription-based business while choosing a payment system to integrate with. Subsequent installments will cover such recurring billing aspects as account balancing and collections. Particularly, the next article will describe more advanced recurring billing features, such as accounting methods and account balancing methodologies.

Introduction to Recurring Billing

The purpose of the mini-series of articles we are going to publish is to familiarize businesses with the concept of recurring billing and the most important recurring billing-related features to be considered by a business while choosing a payment system to partner with.

Many people feel that recurring billing is just an ability to charge the same amount every month over and over again, and whichever system can do this for the lowest price, is the one to go with. In reality, the situation is more complicated, because there are various paradigms and specific features that may be required. These features will make recurring billing process extremely easy on one system, and extremely complex and limiting on another.

Subsequent sections will describe various recurring billing aspects and features.

Recurring billing types

There are two recurring billing types which can be defined as committed and uncommitted recurring billing.

  • Uncommitted recurring billing carries no minimum time commitment and requires no special handling in case of delinquency (when the service or subscription just gets discontinued). A common example of uncommitted billing would be a subscription to news or dating web-site
  • In case of committed recurring billing if a payment is missed and an account becomes delinquent, a collection attempt is made to reinstate the account and collect any past due. Simply deactivating the service is not an option in such cases. Examples of committed billing include term gym memberships and cell phone contracts

Types of recurring payments

All recurring payments can be classified as falling into a regular scheduling pattern or an irregular one.

  • Regular payment schedule – recurring payments fall into some regular schedule (weekly, monthly, weekly, quarterly, annually). An example is a gym membership billed every 5th of the month
  • Irregular payment schedule – payments are made on specific, arbitrarily chosen (pre-defined) dates, depending on specific business context. An example is a payment arrangement for debt repayment

When regular payment schedule is followed, the terms of the recurring payment are represented with a payment schedule (also referred to as a payment plan). There are several payment schedule types available.

Payment schedule (or payment plan) types

  • Fixed (term) payment plan – a certain payment amount is agreed upon, and the number of payments is limited (fixed) by the agreement/contract. For example, $1,200 can be paid during a 12-month period at $100 a month
  • Unlimited (pay-as-you-go) payment plan – payment is going to recur until the plan is explicitly cancelled. For example, $40 a month web-site subscription can recur as long as it is not explicitly cancelled by the client
  • Hybrid (rollover or open-ended) payment plan – initially consists of a fixed (defined) number of payments, however, after the initial fixed number of payments, the billing continues to recur (the plan becomes unlimited) until it is explicitly cancelled. For example, 6 monthly payments, $100 each are required, however, the billing continues at $50 per month (after the initial 6 months) as long as the customer desires to use the service.

While regular payment schedule can use any of the three aforementioned payment plan types, irregular payment schedule relies on fixed pre-defined dates only.

Now that recurring billing types and payment plans are described, it is appropriate to move on to specific recurring billing features. The next post will describe essential features, which are typical for recurring billing process.