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What is a Recurring Transaction?

A recurring transaction is an agreement between a cardholder and a company providing goods/services that essentially authorizes the charging of periodic, automatic payments during a set amount of time. The transaction can be charged on a weekly, monthly, or yearly basis. The cardholder is typically charged in exchange for goods or ongoing services.

How Do Recurring Transactions Work?

A cardholder might have recurring transactions in place to fund an internet service or magazine subscription. Recurring transactions often repeat for an indefinite length of time. However, they can also be scheduled to last for only a certain period of time. In most cases, recurring transactions will continue until the cardholder cancels or defaults on the plan.

It’s not entirely uncommon for recurring transaction plans to end with customer disputes or conflict. Once recurring transactions are set up by the cardholder and company in question, they can remain active for months or even years. If a recurring transaction plan extends for a long period of time, it becomes easy for the cardholder to forget about them.

How to Prevent Chargebacks and Fraud

If enough customers attempt chargebacks against your company, you run the risk of the credit card company flagging your company as being suspicious.

When you arrange an agreement between your company and a cardholder for a recurring transaction plan, the cardholder must submit written authorization of these periodic payments for the goods and services received. This authorization must be given to your company before the plan outlined in the agreement can begin. The document outline the recurring transaction plan should detail the recurring rates, the frequency of the transactions, and the length of the term that the agreement will last. It’s critically important that you retain this document for as long as the cardholder’s recurring transaction plan lasts.

Should there be any changes whatsoever to the agreement or contract, the cardholder must re-submit a form authorizing the recurring transactions to continue.

It is inevitable that, at some point, cardholders will wish to cancel recurring transactions that they perceive as no longer useful. It is practically unavoidable. However, in order for the cardholder to officially cancel these services and recurring payments, they must submit a cancellation notice in some form. Likewise, a cardholder can be removed from a recurring transaction plan if their credit card is flagged as dishonorable, expired, cancelled, or invalid.


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