How to Set Up Recurring Payments (Real Life Examples, 2023)

Learn how to set up recurring payments to make life easier for your customers and improve your bottom line.

Setting up and accepting recurring payments means allowing customers to provide payment information up front just one time for an ongoing product or service they are purchasing. As the seller, you then have permission to charge that payment method at the agreed-upon intervals. What’s great about recurring payments is the time and money it saves for business owners - no more chasing down customers to collect payment! It also provides a steady and predictable income stream and who doesn’t want that?

Customers also like recurring payments because it makes their lives easier too. They don’t have to remember to make payments each month (or other time frame) and can receive their product or service without interruption. 

In this article, we will explain how to accept recurring payments and what you need to do to ensure that your infrastructure is set up properly. Read on and before you know it you’ll be on your way to streamlining your business and offering recurring subscriptions and payments. 

What are Recurring Payments?

The definition of a recurring payment - which is also sometimes called recurring billing or automatic payment - is a payment that is processed on an ongoing set schedule. Most commonly used for things like subscriptions and membership fees, in order to authorize a recurring payment customers sign an authorization form. 

Automatic recurring payments can be charged to a credit card or directly debited from a bank account depending on what the merchant offers and what the customer chooses. There are both fixed and variable recurring payments. In a fixed payment, the charge is the same in each time period. Magazine subscriptions are a good example of a fixed recurring payment. In contrast, a variable payment may have a different amount each pay period. For example, an electric bill might be set up to be paid automatically, but the amount will depend on the particular month’s usage. 

What are the Main Ways to Accept Recurring Payments?

In order to accept recurring payments, you must have the right infrastructure set up. The easiest option is to use a full-service payment processor that can take care of the entire process from start to finish. This would include the technical and logistical processing of the payments as well as software to help you keep track of customers and billing. 

Regardless of the payment processor that you choose, there are three main ways to accept recurring payments: ACH transfer, invoices and credit or debit card authorization forms. 


An ACH payment is a direct-to-bank transfer in which a customer authorizes the transfer of funds from their bank account to your business’ account. Some people prefer to use ACH transfers because it eliminates the need for credit or debit cards. It is a service that is only available in the United States. 


Some sellers may prefer to use invoices as a way to accept recurring payments. You can set up a system so that invoices are automatically sent to the customer at the regularly scheduled time. The downside to this method is that the customer still has to manually make the payment, so you do run the risk of having to chase them down and remind them. 

Credit or Debit Card Authorization forms 

To use a credit or debit card to make a recurring payment, the customer simply fills out an authorization form giving permission to charge the card on a recurring basis. The card details only need to be provided one time. 

Recurring Payment Processors Comparison and What to Look For?

Most payment processors offer recurring payment services, enabling you the opportunity to offer recurring payments as an option for your customers. You need to decide if you are going to use a third-party payments provider that will process the payments for you with the funds going into their merchant account, pooled together with other sellers’ payments. From there, the payment provider will pass the funds to you once they settle. When you use a third-party payment provider, expect it to take around 2 business days for the funds to arrive in your bank account.

Your other option is to open your own merchant account, which is dedicated specifically to your business and is not shared with other sellers. The initial process in opening up a merchant account can be long and bureaucratic, but once the account is set up, you will instantly receive payments as they are made. Using a third-party payment provider is definitely the simpler and quicker option. 

When you are doing the research in order to choose the payment processor that works best for you, there are a few fees and charges that you should be sure to compare to make sure you are getting the best deal:

Transactional Fees

Most providers will charge either a flat monthly fee or a per-transaction fee with some charging a combination of both. When comparing the costs, also keep in mind how many transactions you expect to do each month. 

Cancellation Fees

You may decide that you are not happy with the payment processor that you choose. Make sure you are aware of the cancellation policy and whether you will incur any fees should you choose to stop the service. 


While hopefully you will not have too many chargebacks to deal with, most providers will charge fees for any chargeback transaction. A chargeback takes place when a customer disputes a charge, usually for reasons such as the wrong amount was charged or the product was not as expected. 

Recurring Payments Offered

Of course, you want to make sure that the payment processor that you choose enables you to accept recurring payments. One of the things you should ask potential payment processors is how to set up recurring payments using their system so that you can go with a provider that makes it easy. 

Who are Recurring Payments For?

As a business owner, you are likely to consider the trade off of one time payments vs. recurring payments in order to decide whether recurring payments is something you should be offering. If you would like to save time and ensure an ongoing income stream and you offer a product or service that makes sense to sell as a subscription or membership, then recurring payments are for you.

Recurring payments can also work for high-priced items - if you want to let the customer split the cost and pay it over time, you can also set up a recurring payment plan so that the installments will be paid automatically. 

Steps to Set up and Accept Recurring Payments 

Regardless of the payment processor you choose to use, the steps required to set up and accept recurring payments will be very similar and will include the following:

  1. Select and sign up with a payment processor and connect the system to your online store.
  2. Customer selects the item or subscription to purchase on a recurring payment plan and enters their payment information (i.e. credit card or bank transfer information).
  3. The payment information is stored in the payment processor.
  4. The customer is asked to confirm authorization for storing the payment information and executing the future charges on a recurring basis.
  5. On the designated dates, the stored information is automatically used to make the payments. 

Which Recurring Payment Solution is Right for Your Organization's Needs?

Another choice you will need to make is whether to offer invoice-based recurring payments, in which the customers receive an invoice each month (or other time period), or an online recurring payment solution in which the customers enter their payment information one time. 

Invoice-based recurring payments are usually used in the following cases:

  • Service providers such as gardners, house cleaners, personal trainers, child care providers and others. 
  • Tuition or lesson fees for private tutors, dance or other fitness classes, instrument lessons or more.
  • Subscription services such as wine-of-the-month-clubs, fashion or make-up boxes, or even store loyalty programs.

Online recurring payment solutions work for situations including the following:

  • Subscription boxes that are sold via online sites so that the charges can be run each month before the new box is shipped.
  • E-learning platforms that offer courses online allow students to enter their payment information one time and be charged on a recurring basis for as long as the course lasts.
  • Some membership blogs and other websites may have members only areas with content that is only visible by those who purchase a membership. They can purchase online using a recurring payment service.
  • Online services like SaaS products, gaming, and other mobile apps all rely on online recurring payment solutions to accept payments from their users. 

The bottom line is that if you are selling something that automatically renews, it is helpful to be able to accept recurring payments online. The easier and more seamless the process is for the customers, the happier and more loyal they will be. 

Benefits of Setting Up Automatic (Recurring) Payments

There are a number of benefits for both the seller and customer in being able to use recurring payments, including:

  • Increased convenience - recurring payments removes the entire burden of payment off the customer’s shoulders once they enter the payment information the first time. The information is then stored and authorized for use at future dates, ensuring that the will receive continuity of service without having to take any further action. This can definitely boost customer retention.
  • Fewer late or missed payments - because the customer does not have to take initiative to make the payment happen, you will get paid on time every time. Recurring payments eliminate the risk of the customer forgetting (or purposely) to pay.
  • Reduce administrative tasks - no one likes chasing customers for payments or issuing invoices manually. By automating recurring payments, the administrative tasks involved in collected payments are significantly reduced. All you have to do is sit back and watch the money roll in. 
  • Predict your cash flow - when you know how many people have authorized recurring payments, you know exactly how much revenue you can expect to see in the coming months. This is extremely helpful for cash flow planning.

Cons of Accepting Recurring Payments 

Although there are many benefits to accepting recurring payments, there are still some potential downsides, including the following:

  • Difficult to fix errors - if a billing error is made, it might take a while for the customer to notice since the charges are made automatically. Once they do notice, especially if significant time has passed, it can be a challenge to fix the error and provide the customer with a refund if relevant. 
  • Overlooked charges - if a customer forgets that they signed up for a recurring payment and then suddenly realizes that they have been paying for a service for months without using it, they may become upset. Regardless of whether they were at fault, they may blame the business, creating an unpleasant situation.
  • Declined payments - if a customer’s card expires or they have insufficient funds, a recurring payment may be declined. For the customer, this is a hassle because they may suffer a break in services or not receive a product that they were expecting. It is also a problem for the business that was expecting to receive a payment at a certain time. 


How much does it cost to set up recurring payments?

The costs of setting up recurring payments may differ based on the payment processor you choose. You can expect to pay a fee that is likely to be a small percentage of the total transaction, similar to the fees for one-time transactions. Some providers may also charge a monthly flat fee for recurring payments, so it is worth looking at the fine print and making sure you understand exactly what you will be charged.

How do I make recurring payments to an individual?

If an individual does not have a business account or a way to accept credit card payments, you can still set up recurring payments using your online bank account and arranging for regularly scheduled bank transfers.

Can I set up recurring payments to go out monthly?

The recurring payment schedule is decided between the seller and the buyer. As long as you are using a payment processor that allows for recurring payments, you can choose the frequency at which you want the payments to be processed.

Why is it important to get recurring payments right?

Recurring payments have the potential to be of great benefit to your business and to your customers. It’s important to get it right so that you can reap the full benefits, provide convenience to your customers and stabilize your cash flow. If you get it wrong, you risk offering customers a negative experience, and with so much competition in the market, if they don’t like the experience with you, they will fine another seller.

Meet the author
Anthony Back
Anthony is an experienced fintech analyst, content marketer, and copywriter based in Tel Aviv, Israel. With a deep understanding of payment technologies, he has worked with leading financial institutions and fintech companies worldwide.

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