What are recurring payments?

A recurring credit card payment refers to when a customer authorises or permits merchants to take regular payments from them via their debit or credit card. Payments can occur monthly, weekly or, annually. This is a Continuous Payment Authority (CPA). It may only cancel once the customer opts to do so themselves. These payments have become very popular and maybe set up face-to-face, online, or over the phone.

How do recurring credit card payments work?

A customer is asked to give a company permission to use their credit/debit card details. This allows the company to take the payment from them regularly.  Payments can be

• regular and of a fixed amount,
• less frequent but also a recurring payment,
• a one-time payment that is to be paid in the future.

These recurring credit card payments provide businesses with predictable cash flow and regular opportunities to make sales. These payments are automatic with customers to receive orders quick and easy.

Recurring credit card payments are particularly useful in relation to:

• Transactions that require immediate clearing or next-day payment
• Liquid assets and high-value goods where altering recurring payment methods like Direct Debit are unsuitable

Customers have become more and more aware of the power that comes with a subscription that renews itself automatically. Recurring credit card payments have not only proven to be advantageous for the purchaser, but also for the merchant.

For instance, through recurring credit card payments, entrepreneurs may charge for their services and collect money regularly. This does not have the requirement of asking for a renewal of the amounts. Furthermore, customers do not need to be concerned about invoices going missing or slipping their minds. These payments are highly convenient in this regard.

Recurring credit card payments are often used by:

• Gyms
• Internet Service Providers
• Payday loan companies

Amazon Prime uses recurring credit card payments for regular subscription fees. By subscribing to a paid service or product like Spotify or Netflix, the customer allows the merchant to have continuous authority to take payments from their card.

This is an agreement the customer makes with the retailer. Therefore, a customer should:

• Only give their card details to a retailer they trust.
• Be aware of the terms and conditions of the agreement with the retailer or subscription service. This includes the length of time of the subscription and if the amount of the subscription increases over time like when a free trial period expires or the initial offer period ends.