If a cardholder agrees to pay recurring transactions, the merchant is authorized to charge the payment card at predetermined intervals (such as monthly, quarterly, or yearly) for an ongoing basis.
There are various types of recurring billing structures:
- Free trial offer: The cardholder receives the initial product or service for free, but pays for subsequent services or merchandise. Most free trial offers are also negative option billing (see below).
- Negative option billing: The customer agrees to automatically receive goods or services and, in exchange, automatically be billed. This process will continue until the customer cancels the agreement. Examples include memberships or subscriptions.
- Installment billing: Rather than pay the entire purchase amount with a single transaction, the cardholder is able to reimburse the merchant with smaller payments at predetermined intervals. Examples include a mortgage or other loan payment.
Also referred to as:
- Subscription billing