What does recurring transaction mean?
A transaction that is a charge applied to a cardholder for an ongoing subscription, membership, or the recurring shipment of goods. A recurring transaction is often set up when you subscribe to a product that you will receive on a monthly basis.
Recurring transactions occurred before the introduction of eCommerce and these would have included ordering the same newspaper each day or each week and it being charged to your account. In online commerce, the recurring transaction will be automatic and the charge will be applied to your credit or debit card or another payment method of your choice such as Paypal.
An example of a recurring payment for many internet users is their internet service, or perhaps even hosting for a website. Recurring subscriptions like this are typically entered into for an indefinite period of time, and will continue until the cardholder cancels the agreement. Recurring payments are subject to many factors, and because consumers can forget about agreeing to a subscription or recurring payment, especially if it is billed quarterly or annually, they are more frequently subject to chargeback’s, which can damage a merchant’s reputation with the charge companies. It is also possible for the recurring payment to be concluded by an expired credit card, cancelled credit card, or simply a changed account number.
Merchants should take steps to prevent chargebacks, and to protect themselves from any potential backlash when they do occur since the merchant charge account is critical to doing business online.