Subscription Payment Tips

There’s never been a better time to be a subscription merchant, but it’s still a challenging market, especially with respect to payments. Chargebacks, declines, and other issues are a frequent problem, and can disrupt the automatic scheduled payments that subscription merchants depend on.

Card networks have addressed these problems by creating more rules for how these payments must be handled, but even merchants who stay in perfect compliance get stuck dealing with payment-related hassles.

  1. Choose the Right MCC
  2. Use an Account Updater
  3. Optimize Your Merchant Descriptor
  4. Set a Recurring Billing Indicator
  5. Try Intelligent Routing
  6. Review Your Policies
  7. Make It Easy to Cancel
  8. Keep Customers in the Loop
  9. Obtain Fresh Authorizations
  10. Hold On to Your Records
  11. Conclusion
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The subscription market keeps expanding, with an ever-increasing number of companies figuring out innovative ways to entire their customers into a recurring billing relationship.

Even auto makers have embraced the subscription model, and with seven out of ten business leaders putting faith in subscriptions as a key part of their future growth, Juniper Research expects the market to swell by 200% over the next four years.

In partnership with Juniper Research, Chargeback Gurus has written a whitepaper that analyzes the past year in subscription payment data and provides detailed insights into the causes and frequency of declines, chargebacks, and related issues. Based on our findings, we can provide some tips for subscription merchants on increasing their approval rates and avoiding payment disputes.

Choose the Right MCC

Your Merchant Category Code can make a big difference to your transaction approval rate. Some MCCs are categorized as “high risk,” and may be subject to more restrictive processing rules. Your acquirer is responsible for assigning your MCC, so check in and make sure yours is accurate. You should choose the MCC that most narrowly fits your merchant category, as that will ensure that you aren’t subjected to any unnecessary rules.

Use an Account Updater

Card networks and payments gateways offer account updater services that will automatically update expired or reissued credit cards that are on file with the merchant. This boosts approval rates by eliminating the need for customers to manually update their credit card information. Customers will sometimes let a subscription lapse when the automatic renewal fails, but services like these can help you retain them.

Optimize Your Merchant Descriptor

Cardholders often file friendly fraud chargebacks when they see a charge on their bank statement and they don’t recognize the name in the descriptor. To avoid needless disputes like these, make sure your descriptor clearly identifies you by a brand name the customer will recognize, and includes contact information such as phone number or URL.

Set a Recurring Billing Indicator

Some providers will give you the option of setting a special descriptor for recurring billing payments. This can prevent erroneous declines, speed up dispute inquiries and resolution, and reduce confusion when customers are reviewing their bank statements. Check with your merchant service providers to see if this feature is offered, and if it is, make sure that your recurring billings are set up to use it every time.

Try Intelligent Routing

There are third-party companies that use machine learning to game out the optimal payment rails for any given transaction, with a goal of minimizing costs and maximizing approval rates.

They may even be able to alert you ahead of time when a particular payment is likely to be declined, enabling you to deal with it proactively.

These services may be costly, but when used effectively they can save you money by helping you avoid fees and declines.

Review Your Policies

Take a close look at your sign-up, billing, cancellation, and refund policies. Make certain they are fully compliant with card network regulations, as you won’t be able to fight back and win any disputes if you aren’t following the rules for recurring billings. Be sure that your policies are transparent and easy to understand, and make customers indicate their agreement with a signature as part of the purchase process. 

Make It Easy to Cancel

As per the card network rules, your cancellation option should be fast, simple, and easy for customers to find. When you receive a cancellation request, process it immediately and send the customer a notification confirming the action. If possible, consider offering customers a prorated refund when they cancel before the end of a billing cycle, as this can avoid contentious “Service Not Provided” disputes.

Keep Customers in the Loop

Manage Chargeback In-House Or OutshoreTo keep customers from being surprised by recurring payments they’d forgotten about, send a notification through their preferred communication channel before you charge their card. This isn’t always necessary for monthly payments, but for billings on an irregular or annual cycle, it’s a must. This can help you avoid both declines and chargebacks.

Obtain Fresh Authorizations

Whenever you raise your subscription rates, notify the customer several days in advance and obtain a new authorization for the higher amount—don’t just automatically charge it to the card on file. You’ll also need to obtain a fresh authorization before you charge returning customers who previously closed their accounts. If you don’t do this, the customer may have a legitimate basis to dispute the charge.

Hold On to Your Records

When you receive a friendly fraud chargeback, you don’t have to just take it—and you shouldn’t. With the right evidence, you can fight back by representing the charge and sending along compelling evidence for the issuer to review. If you can prove that the chargeback is invalid according to the card network rules, the issuer should reverse it.

For the greatest chances of success in representment, keep detailed records of your transactions and communications with customers.

To combat disputes, you may need to furnish copies of your subscription agreement, cancellation logs showing that the customer never attempted to cancel, usage logs showing that the customer used and obtained benefit from your services during the time period under dispute, receipts for refunds, and various other documents.


Subscription merchants are active in a competitive marketplace, and it can be hard to focus on growth and optimization when you’re always having to put out payment-related fires. Following tips like these can make it a more manageable, but some issues, particularly with respect to payment disputes and chargebacks, can be difficult to get under control.

It can be helpful to partner up with service providers who have experience in your industry and know the intricacies of the payments ecosystem inside and out. With the right knowledge and support, subscription merchants can ensure that they aren’t losing revenue to avoidable payment issues.

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