What are Recurring Payments?

Introduction

In credit card processing, recurring payments and recurring billing are closely related but slightly different concepts — think of them as the “what” and the “how.”

Recurring Payments – The What

This refers to transactions that automatically repeat at set intervals (e.g., weekly, monthly, annually) without the customer having to manually authorize each charge.

• Example: A £12 monthly Netflix subscription charged to your card.
• The customer gives permission once (via agreement or terms of service), and then the merchant’s payment system keeps charging on schedule.
• These payments can be:
  • Fixed amount (e.g., £50/month for a gym membership)
  • Variable amount (e.g., utility bills that change monthly)
     

Recurring Billing – The How

This is the system or process a merchant uses to manage and execute those recurring payments.

• It’s the infrastructure that:
  • Stores card/payment info securely (in compliance with PCI DSS standards)
  • Triggers the charges at the right times
  • Generates invoices or receipts automatically
  • Handles failed payments (retries, notifications, card updater services)
• Often part of a subscription management platform or payment gateway.
   

How They Work Together

• Recurring billing is like the automatic coffee machine.
• Recurring payments are the cups of coffee it serves at the same time every day without you having to press the button.
   

Key Points in Credit Card Processing

• Authorization: Cardholder consents once, merchant keeps billing according to the agreed schedule.
• Card-on-file storage: Must use secure vault/tokenization (merchant usually doesn’t store raw card numbers).
• Merchant category code (MCC): Some MCCs have special rules for subscriptions and recurring transactions.
• Decline management: Expired cards, insufficient funds, fraud flags — all require retry strategies.
• Chargeback risk: Higher for subscriptions if customers forget they signed up.