A subscription and membership merchant account gives you the ability to take payments on a recurring basis easily and quickly. All membership and subscription merchant account processing includes an extensive choice of customizable recurring payment plans allowing you to meet the needs of your business and your customers.

Recurring billing is commonly used by entertainment sites, information newsletters, internet services, online dating, software products (SaaS), games, music, video, digital media, social networks, and any service which is consumed on a regular basis. 

Recurring payments are increasing being used by companies that sell tangible products as well.  A membership merchant account is important for businesses that offer health & beauty, nutrition & food, fashion, and a host of other products which are shipped to members on regular basis.

How Chargebacks Affect Subscription and Membership Merchant Accounts

Not all companies with recurring billing models are classified as high risk. For example, utilities, mortgages, insurance, home entertainment, and car payments are paid for on a recurring billing basis. Few people are going to initiate a chargeback for these needed products & services.

It’s a different story for non-essential goods and services, where the risk for chargebacks escalates. For this reason, membership and subscription merchant services are classified as high-risk merchants by acquiring banks. 

With a recurring billing model, chargebacks can occur if consumers do not remember agreeing to recurring payments. To prevent these types of chargebacks, disclose the recurring payment terms clearly on your checkout page. And display cancellation procedures & refund policies information on your website.  

The greater risk with recurring payments is the longer period of contingent liabilities on chargebacks. For instance, with a yearly subscription, customers can chargeback up to 18 months after the product was initially purchased (6 months after the last payment). 

A recurring subscription and membership merchant account is frequently targeted by “friendly fraud”. Consumers call their issuing bank and claim they did not authorize the payment and request a refund for the entire subscription or membership plan. In many instances, the issuing bank sides with their customer over the merchant. Which results in increased chargebacks to the membership or subscription merchant account.

High Risk Recurring Billing Models

Some recurring billing models increase the chargeback risk, although processing is still available.  Here’s a few examples:

  • Negative Opt-Outs.  Customers think they are signing up for a single payment.  Instead, they are agreeing to recurring payments until they actively cancel or negatively “opt-out” from being charged. 
  • Free Trials.  The customer is offered deferred billing or a free product if the consumer pays for shipping.
  • Buried Terms. Conditions are buried in the small print, perhaps hidden in a long agreement or posted in a hard-to-find place on the website.   

Full disclosure of the terms of the purchase is simply smart business.  And helps prevent chargebacks on membership and subscription credit card processing accounts.

How to Apply for Subscription and Membership Merchant Services

Karma Payment Solutions specializes high volume membership and subscription credit card processing accounts. An extensive network of acquiring banks gives you the processing capacity you need. Recurring billing is a standard feature on all accounts. 

To get going, simply submit an application along with supporting documents. Information requested include details about your company, processing & bank statements, and proof of identity for the signer on the account.

US subscription and membership merchant accounts take 7-10 days for approval. Approval for international processing takes 14-21 days.