I cringe whenever I hear “Our membership dues are $195 and we want to auto-bill our members’ credit cards every year.”    Don’t get me wrong, auto-billing (aka “recurring billing”, aka “automated recurring billing”) is an extremely efficient and profitable tool when used in the appropriate situations such as a monthly fee for access to website content or a monthly gym fee.  It’s when the automated billing cycle gets extended beyond a 3 month interval that the efficiency and rewards tend to break down.  Here are three primary reasons NOT to auto-bill membership fees on an annual basis:

Risk

Customers (your members) HATE to look at a credit card statement and see some unexpected charge.  I don’t care how many emails you may send reminding them that he/she had agreed to the charge, that the charge would be on this date, and that now you have assessed the charge and here is your receipt.  When you auto-bill, the duty to prove the validity of the charge rests completely upon you, the merchant.  The customer only has to call the card issuer and deny the charge.  No questions asked.   There’s your RISK.  Chargeback.  They just took money from your bank account and charged you a nice fee.  You now have a chargeback history…your discount fees won’t be decreasing any time soon.  The merchant (you) must provide documentation as to the validity of the charge.  Do you have a signed authorization?  Can you produce it?  When was the last time the customer used your service?  That’s a tough one to show when we’re talking membership dues.  If you have the right software and database structure in place, you’ll be able to figure out when and if they have been logging into your website or attending meetings or events, but will that be enough to reverse the chargeback?  How long will it take to submit all that as an appeal?

Retention

Customers (your members) HATE to look at a credit card statement and see some unexpected charge.  They’d much rather be politely reminded.  Better yet, they’d like to think they’re getting a deal.  Marketers know this.  So do smart membership chairmen.  Approach an annual membership anniversary as an opportunity to contact your members on an individual level.   Re-energize them.  Remind them of the benefits their membership brings.   Start early and nudge them along.  Utilize automated tools to send personalized emails on a predetermined schedule.  In the long run, your membership will grow much more quickly.

Practicality

Take a look in your personal and company credit cards.  How many of the cards in your possession will expire within the next twelve months?  The next 24 months?  When is the last time you had to call a card in lost or stolen?  A recent study found that one in five credit cards is called in lost or stolen each year.   When setting up annual auto-billing, you’ll be lucky if one in five make a complete cycle anyway.  The over four of five have just been declined.  Your member now gets an email saying their credit card has been declined.  Trust me, that email they do NOT LIKE.  Are you going to get your membership fees?  Maybe.  Maybe not.  If you do, it’s certainly won’t be as soon.

Image Source Tradebit