E-Commerce Merchant Account Recurring and Installment Payment Basic Facts

The Credit Card Networks define recurring transaction as a sequence of transactions that are processed at predefined intervals, not in excess of one year between each two payments, representing an agreement between a consumer and a card acceptor for the purchase of goods or services provided over a continuous period of time.

Recurring Transaction Components

Listed below are the key components of a recurring payment plan that all e-commerce merchant account holders should be familiar with:

• The consumer sets up a relationship with a card acceptor to receive continuous services or merchandise until the contractual agreement is cancelled.
• The consumer gives permission to the card acceptor to bill his card account on a recurring basis.
• The transaction amount may be a fixed amount or it may vary with each billing cycle.
• The payment relationship is made up of more than the initial one, with future payments being made on a consistent basis, not in excess of twelve months.

Installment Transaction Basics

Installment payments are not seldom confused with recurring ones. The Associations define an installment payment as a single purchase of products or services charged to a single card account in multiple segments, placed over a predetermined period of time that is agreed between a consumer and a card acceptor.

The difference between the recurring and installment payment plans is that, a recurring payment is one made for merchandise or services that are provided over a period time, while, an installment payment is a single purchase, where the payment occurs on a schedule that is agreed by the customer and card acceptor.

Recurring Payment Indicator Basics

Visa and MasterCard have provided e-commerce merchant account users with a way to identify recurring transactions with their authorization requests and settlement messages and facilitate a more accurate decision-making by card issuers and the recognition of consumers. The Associations do so by requiring the use of the Recurring Payment Indicator in all of their authorization and clearing records. Recurring payments tend to be lower risk than single transactions, ones that should be approved if the credit card account is otherwise in good standing.

Cardholder Benefits of Signing Up for Recurring Payments

Recurring payment plans benefit consumers by:

• Ensuring on-time payments, thus providing uninterrupted service and preventing any late payment fees.
• Doing away with the time and expense associated with processing payments manually.
• Increasing convenience by providing a quick access to payment details and options online.

E-Commerce Merchant Account Benefits

Recurring and installment payment plans benefit card acceptors by:

• Increasing consumer loyalty.
• Increasing customer service efficiency by improving payment convenience.
• Improving cash flow by facilitating timely and regular payments.
• Reducing handling of cash and managing checks.
• Improving efficiency.