How do you accept recurring payments?

  • Recurring payments are credit or debit card payments that your company automatically receives at predictable intervals.
  • Third-party payment processors handle recurring payments with your bank as well as the bank behind the customer's card.
  • Recurring payments reduce your accounts receivable and cause less service disruption for customers.
  • This article is for small business owners who are interested in setting up recurring payments for their customers or clients.

Think about receiving payment from customers or clients who use your services on a regular basis. What comes to mind first? Maybe you appreciate your customer loyalty right away, but some are annoyed by late payments. Often, these late payments are not intentional. There is a lot going on between customers and customers and they can easily forget to pay your invoice. Knowing how to accept recurring payments solves this problem, so we'll walk you through the process.

What are recurring payments?

Recurring payment is any credit or debit card payment that your company receives automatically on a regular basis. They differ from a customer or customer handing you their card or filling in their information online each time they make a purchase or renew your services. Instead, your third-party payment processor keeps the customer or customer's payment information on file and charges it on a recurring basis.

Recurring payments can be monthly or annually, as is common in small business cases. Less commonly, recurring payments can be weekly or daily. You also have the option of letting recurring payments run forever or ending them after a certain date.

significant achievementsImportant achievements: Most small business recurring payments are monthly or annual, but they can be weekly or daily in some cases.

How do recurring payments work?

Recurring payments work through your business's third-party payment processing company. These third parties enable your business to accept credit or debit card payments. There are also two types of payment processors: payment service providers and merchant accounts. The former oversees all processing, security and deposits of your clients or clients' funds. The latter is solely for accumulating funds.

In either case, your payment processing company will contact your bank to trigger a recurring payment. The company will then also contact your customer or customer's credit or debit card network. Thereafter, the network will check with the card issuing bank to see if the transaction is valid and funds are available.

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If all appears to be valid, the network will approve the transaction with your payment processor. After a day or two of hold to counter fraud, you will have your amount. Some payment service providers waive this hold period, although this benefit comes with an additional fee.

What are the benefits of accepting recurring payments?

These are some of the benefits of accepting recurring payments.

  • Fewer late or missed payments: Let's say your customers or clients pay you regularly. With recurring payments, the customer no longer needs to remember to pay you. Instead, they will have their funds automatically withdrawn and sent to you. The result is virtually elimination of late or missed customer or customer payments.
  • No need to ask customers or customers for payment: Every small business owner likes to make money, but some prefer to hassle customers for payment. With recurring payments, you will get your money automatically without asking for it. That means more cash flow and fewer headaches.
  • Easy Accounting and Invoicing: Often, recurring payment platforms can integrate with your accounting and invoicing systems. In this case, a recurring payment may trigger the creation of an invoice and the recording of a credit in the appropriate general ledger. It's less work for you and more accuracy in your billing and accounting.
  • Easy Accounts Payable to Customers: When customers learn that their funds will be withdrawn on a certain date, they no longer need to check their accounts payable for Square Up. Instead, they can sit back and watch their accounts payable account have been credited and their cash account debited. Plus, if their accounting, invoicing and payment processing is as integrated as yours, your recurring payments will really complement their operations.
  • Hassle Free Restocking for Customers: Let's say you operate a B2C company that sells tangible products that become unusable after a certain period of time. Your customers will then need to take the time to buy new products from you. Recurring payments solve this problem. They automate customer payments and add new customer shipments to your inventory management software.
  • Options for subscription model: If you subscribe to a magazine, newspaper, or digital publication, you're probably already familiar with recurring payments. Think about how useful they can be to your business. With monthly payments, your customers can maintain hassle-free access to your platform. More efficient, customer-friendly business is possible, if not possible, with a recurring payment subscription.

Types of Recurring Payment Structures

Recurring payments generally fall into two broad categories, both of which have some subcategories.

1. Fixed Recurring Payments

Customers or customers making fixed payments send you the same amount with each payment. Common examples include monthly donations to nonprofits or subscriptions to publications. They also include customer product subscriptions, as shipping charges you pay or defer to the customer should not change between orders.

2. Variable Recurring Payments

Variable payments are less common than fixed payments, although you are likely to be familiar with them from both your business and personal life. The most obvious example is your utility bills. Certainly, you are not using the same amount of electricity, gas or water every month. Thus, your monthly costs will vary, as will the size of any recurring payments you make.

In a small business, most products and services are fixed in pricing, so there are fewer variable recurring payments. However, for service providers whose offering varies in quantity (ie, a tutor who sometimes provides two hours of tuition instead of one), variable recurring payments may be preferable.

significant achievementsImportant achievements: Variable recurring payments are somewhat rare in business, although they can benefit your company in certain circumstances.

Solutions to set up recurring payments

There's no one way to set up recurring payments for your business. Instead, the steps you take will vary based on your credit card processor of choice. We've covered how to accept recurring payments with some of our reviews of the best credit card processing providers.


Clover is our preferred two-in-one point-of-sale and credit card processing platform. You can use Clover's virtual terminal to accept and process payments completely digitally. Simply log in to the Clover web dashboard and accept all pending transactions. You will pay a fee for this service (optionally including a 1% rate to avoid a day or two of withholding).

Beyond its tools for accepting recurring payments, Clover has all kinds of business-friendly features. You can use Clover to create gift cards, generate sales reports, create an e-commerce website, and more. Clover also offers merchant cash advances that can help you get additional funding for your business.

TipTip: To learn more about the myriad ways Clover facilitates small business cases, read our Clover review.

merchant one

Merchant One's credit card processing is our top choice for businesses that need easy approval to get started using a credit card processor. You can access Merchant One's payment processing services anywhere you have Internet access. The platform also includes an invoice generator and a QuickBooks plugin to fully integrate your recurring payments. You'll also find payer authentication and anti-fraud tools.

When you use Merchant One to accept recurring payments, you pay a monthly fee that starts at $6.95 for the company's introductory plan. Your processing fee will range from 0.29% to 1.99% for swiped transactions. For key-in transactions, the maximum is reduced to 1.55%. No matter how you enter customers' card information, you can securely store it in your Merchant One customer vault.

fat trader

Stax by Fattmerchant is our top credit card processor pick for small businesses. On its dashboard, you can create recurring invoices that generate recurring payments. You can find tools for this in the Advanced Payments menu. Simply set your invoice amount and charging frequency, then determine whether you'll automatically withdraw funds or send a “Click to Pay” link to customers.

Fattmerchant costs between $49 and $129 per month. If your company processes less than $80,000 in annual credit card transactions, each transaction incurs an additional 2.9% fee. Keyed transactions incur an additional 15-cent fee per transaction, and the corresponding fee for swiped transactions is 8 cents. That's the only fee you'll pay; Fattmerchant lacks the hidden fees as with other brands.

Pro Merchant

ProMerchant is a credit card processor known for working with high-risk customers. To a large extent, this difference is integral to the story of the ProMerchant. The company is one of the newest players in the credit card processing space, and aims to become a disruptor. One way to achieve that goal is to get approved for a ProMerchant account in a matter of hours and connect with a ProMerchant support specialist right away. This expert will guide you through setting up recurring payments.

With ProMerchant, you can opt for flat-rate plans or interchange-plus rates. The latter option may provide more transparent pricing, while the former option may be less expensive overall. If you find yourself paying too much, you are not bound by a disappointing, years-long contract. All ProMerchant contracts are month to month, making it easy to cancel.

payment depot

If you expect to process high volumes of recurring payments, Payment Depot is our top choice for your business. Its unusual model of subscription-based pricing and wholesale rates can keep your costs from paying fees that increase with transaction volume. Like ProMerchant, Payment Depot doesn't bind you to long-term contracts, which means you can easily switch if you're not happy. Read our review of Payment Depot for more details.

This guide will help you decide which credit card processor will best suit your recurring payment needs. Once you do, easy accounts receivable management is just around the corner.

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