TABLE OF CONTENTS
What are pro-rated charges?
A prorated charge is a fee calculated based on a partial duration of time rather than a complete billing cycle. This adjustment is used when subscribing to services with specified billing periods.
For instance, consider signing up for a Gym Membership that bills at 30-day intervals (monthly). If the membership costs $100 per month and you sign up on the 12th day of the month, payment is only required for the remaining days in that billing period (18 Days).
In this example, the calculation involves dividing $100 by 30 days, resulting in a daily rate of $3.33. With 18 days left in the billing period, the prorated charge amounts to 18 Days x $3.33 Per Day, totaling $59.94 which would be your prorated dues.
What kind of business uses pro-rated charges?
Lots of them! Just about any business that bills based on subscription will charge a prorated fee for customers that join in between billing periods. Here are a few examples:
|Software as a Services (SaaS) businesses
|Property and auto Rentals
|Internet and Cable services
|Mobil Phone Plans
|And Many More...
What events require prorated billing?
Some businesses have different “Tiers” of services that offer specific benefits depending on which tier you are subscribed to.
Let’s say that a company offers multiple subscription plans such as how “Synapse does for credit card processing fees”. If a customer wants to upgrade or downgrade their plan midway through a billing cycle, a pro-rated charge is likely to result from that change. You may even be entitled to a pro-rated refund!
How do I implement Pro Rated Charges?
The fastest way would be to just calculate your daily rate and multiply it by the number of days left in the . After charging the customer a prorated bill, you can just add them to your recurring billing schedule for normal billing.
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