How Do I Stop a Recurring Payment?

Whether you are a business owner or a private individual, recurring payments can cut into your monthly earnings and profits significantly. If you've ever signed up for Netflix, Hulu, or Amazon Prime, you've experienced recurring payments. By 2026, just the global subscription market on eCommerce marketplaces is expected to be at $904.2 billion.

Business owners use recurring payments for their expenses, but they tend to be for larger amounts. For example, many businesses set up automatic payments for their utilities, rent, and SaaS platforms. In addition to using recurring payments, businesses can utilize a subscription model to achieve a more stable cash flow and better customer retention.

At Swipesum, we help clients find the right payment processing and merchant services. When you work with the company, your payment processor will handle changes to recurring payments. In addition, we can help you optimize your payments so that you can eliminate most of the fees associated with credit card processing.

What Are Recurring Payments?

A recurring payment is a payment that is billed on a recurring frequency that is guaranteed in advance. This may take place each week, month, or quarter. Before the payments happen, the lender and billpayer agree to the payment frequency.

As a business owner or manager, you likely use recurring payments to pay many of your bills. Because the money is pulled from your account automatically through an automatic payment, it prevents missed and late payments. Additionally, many companies will give you a break on your interest rate if you set up recurring payments.

Types of Recurring Payments

Fixed Recurring Payments

Fixed recurring payments are a type of recurring payment where the same amount is charged at each interval over a set period. This type of payment is commonly used for subscription services such as gym memberships, magazine subscriptions, and streaming services like Netflix. With fixed recurring payments, the payment amount remains the same each cycle, making it easier for businesses to manage their cash flow and for customers to budget their expenses.

Variable Recurring Payments

Variable recurring payments, on the other hand, are those where the amount charged each time is different. This type of payment is commonly used for usage-based services such as utility bills, where the amount charged varies depending on the customer’s usage. Variable recurring payments can be more complex to manage than fixed recurring payments, but they provide more flexibility for businesses and customers.

How Do Recurring Payments Work?

When you first set up an account with a company, they will normally give you a choice about how you pay your bills. Make sure to review your account information to ensure all details are correct. Modern companies generally have an online or mobile bill payment option.

Beyond choosing the platform, you can also choose the frequency. For example, you can choose to pay on a one-time or recurring basis.

Normally, the company will send you a notification ahead of time that a recurring payment is about to be made. This gives you an opportunity to discontinue the service or to add funds to your account.

What Types of Companies Use Recurring Payments and Subscription Services?

A variety of companies use recurring payments. Also known as the subscription business model, this technique is great for companies that want to create a consistent revenue stream.

With the subscription business model, businesses don't just get paid for today's purchase. Instead, customers make additional payments at agreed-upon intervals. They have the option to start, renew, or cancel their subscription at any time.

This model is popular because companies can guarantee a revenue stream and budget based on their expected cash flow. In return, consumers can access more services and products. When they need to cancel the recurring payment, they can.

You will find recurring payments in many industries. A few of the most common locations are:

• Direct-to-consumer companies and eCommerce: Me Undies and Lovevery are two examples of DTC companies that charge subscription fees.
• Streaming services: When most people hear someone talking about subscription companies and recurring payments, they immediately think about streaming businesses, like Netflix, Hulu, and Disney+.
• SaaS: There are many SaaS examples, such as Slack and Dropbox.
• Diet and fitness: Diet and fitness companies, like WW and MyFitnessPal, often use recurring payments.
• Publications: The Atlantic, the New York Times, and Bloomberg demonstrate just a few ways that subscriptions are used by magazines and publications.
• Education: You can see examples of recurring payments with Coursera, LinkedIn Learning, and Udemy.

As a business, you may use recurring payments as the vendor requesting payment and the customer making a payment. Thanks to the rapid spread of the subscription model, you can find this type of payment system in many locations. By 2016, subscription payments were already bringing in $2.6 billion per year in the United States.

How Do I Stop a Recurring Payment?

If you are getting charged recurring payments and recurring charges each month, the costs can quickly add up. A single charge of $20 can seem non-threatening, but this cost can quickly add up if you have a dozen subscriptions.

For consumers and businesses, recurring payments can be costly. Many people don’t realize the damage recurring payments can cause to their financial health. 84% of people underestimate how much they spend on subscriptions each month.

Fortunately, recurring payments can be canceled if you go through the appropriate steps.

1. Check Your Account

The easiest option is to visit your online account with the organization. Ensure you review your automatic payment method to manage your subscriptions effectively. Underneath your account, there is normally an option for your subscription, payment, or billing. This area will typically have an option for canceling your account.

2. Search “Cancel Company Name”

Because subscriptions are such a lucrative business model, some companies will deliberately make it difficult to cancel your account. However, you can often find the cancellation page by searching for the company's name and the word “cancel.” Afterward, you can follow the directions on the screen to cancel your services.

3. Call the Company Directly

If you can’t find cancellation options online, call the company to find out how you are supposed to cancel the service. Depending on the organization, you may also be able to cancel automatic payments over the phone.

4. Go Directly to Your Bank to Revoke Authorization

Depending on your banking institution, you may be able to directly cancel your payments through your bank. Contact your bank to understand the specific steps required. According to the Consumer Financial Protection Bureau, you should start this process by sending a letter to your bank and subscription company that revokes your payments.

Alternatively, you can give your bank a stop payment order. This can be done in writing, over the phone, or in person.

5. Changing Your Payment Method

If you need to change your payment method for a recurring payment, you can usually do so by contacting the company directly or by logging into your account online. You may need to provide your new payment information, such as a new credit card number or bank account details. It’s a good idea to confirm with the company that your payment method has been updated successfully to avoid any disruptions to your recurring payments.

Using Technology to Your Advantage

Technology can make it easier to manage your recurring payments and avoid unwanted charges. For example, you can use online banking or mobile banking apps to track your recurring payments and set up alerts to notify you when a payment is due. You can also use services like Google Pay to manage your recurring payments and subscription services. Additionally, there are many tools and apps available that can help you cancel unwanted subscriptions and negotiate with companies to lower your bills. Some popular options include AskTrim.com, Hiatus, and Truebill. By using technology to your advantage, you can take control of your recurring payments and avoid financial stress.

The Advantages of Using Recurring Payments

As a business owner, there are a number of advantages to providing your customers with recurring payments. If you need to change your automatic payment method for a recurring payment, you can usually do so by contacting the company directly or by logging into your account online.

• Better cash flow: Recurring payments provide a better flow of income into your business, so you can budget your expenses and pay your bills on time. When you have better cash flow, you don’t have to worry about missing payments and getting into a cash crunch.
• Higher customer retention: If a customer signs up for automatic billing, they are more likely to keep using your products and services. This means you can increase your customer retention rate.
• Lower late payments: When payments are made automatically, it is harder for them to be late.
• More predictable revenue: With recurring payments, you can predict how much income you will bring in each month, which helps with budgeting.
• Enhanced cost efficiency: When your payments are automated, you don’t have to deal with as many administrative tasks. By skipping manual billing, you can reduce your labor costs.
• Easier accounting: It’s easier to track revenue and reconcile accounts with automated payments.
• Increased opportunities for upselling: Because customers already have an ongoing financial relationship with your business, it makes it easier to upsell and cross-sell other products and services.

Things to Remember When You Set Up Recurring Payments

While there are many advantages to using recurring payments with your customers, there are also important things to consider. Consult with your financial institution to ensure all payment processes are compliant and secure. If you have never offered this type of payment option before, Swipesum can help you figure out your company’s compliance requirements, pricing model, and other factors.

Determine Your Company's Needs

First, you need to figure out what your business needs. Does your company need recurring payment models or flexible payment options?

Typically, a recurring payment model works better for a company that provides ongoing services, long-term contracts, and memberships.

Figure Out Compliance Issues

Payment Card Industry Data Security Standard (PCI DSS) and other financial regulations apply to recurring and standard payments. To make sure you are in compliance with the law, you should talk to a financial advisor or legal expert before you set up recurring payments.

Select Your Pricing Model

Each company is different, so pricing models can vary. You may want to have a flat-rate, tiered, or usage-based model. In other cases, companies may want a freemium model where they can offer a basic version for free and a premium version for a higher cost.

Choose the Payment Options

Flexible payment options can improve your company's customer experience. For example, your customers may want to pay through credit cards, digital wallets, bank transfers, fintech apps, or debit cards. You may also want to accept payments on different billing cycles, like monthly or quarterly payments.

Be Transparent

Before customers sign up for a payment, they should know exactly what the terms and conditions are. Ensure that any stop payment orders are clearly communicated to the specified company to avoid any misunderstandings. Other than improving your customer experience, this can help prevent potential disputes. Your customers should understand how to cancel the recurring payment and when the payment will be charged to their account.

Manage Your Failed Payments

How will your company handle failed recurring payments? Typically, this process involves pausing services, sending a notification message, or automating additional payment attempts. As a part of the registration process, you should communicate your company's policy about failed payments with your clients.

How Swipesum Helps You Stop Recurring Payments

Whether you need to learn how to offer recurring payments that are charged by your company or stop automatic payments that are charged by a vendor, Swipesum can help. We provide chargeback support, payment consultations, and software integrations.

At Swipesum, our goal is to help clients find the best payment processing and merchant services possible. As a part of this mission, we offer our clients support with merchant statement audits, interchange optimizations, and hardware programming. We pride ourselves on being a client advocate for chargebacks, fraud, and recurring payments.

To learn more about our network of payment providers and financial institutions, reach out to our integrated payments experts today.