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What are recurring charges and how do they work?

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    If you've heard about recurring charges and don't know what they are, you may not be sure what their impact is when it comes to financial management. Let's learn more about what recurring charges are, how they function and whether they're useful for you personally.

    What is a recurring charge?

    Recurring charges are charges that automatically occur at a regular interval, such as monthly, quarterly or annually. You usually agree to pay recurring charges when you enroll in some type of subscription, membership or service. For example, you may be automatically charged each month for your gym membership, streaming service or subscription box.

    Some services, such as many popular music streaming platforms, create an automatic recurring charge at the point of sign-up. These will likely require your consent and payment information up front so they can automatically make a monthly recurring charge. Others, such as utilities, may offer you the possibility of setting yourself these automatic payments to pay your bill so that you don't have to do it manually every month, that is to say, you would set an automatic recurring charge.

    Types of recurring payments

    There are two types of recurring charges — fixed or variable.

    • Fixed recurring charges: These charges will likely be for the same amount every time you're billed, whether that be weekly, monthly, quarterly or annually. An example of this may be a streaming service, which charges the same amount each billing cycle (with the exception of any announced change of rates or any additional in-app purchases you make that will be added to your bill).
    • Variable recurring charges: If the charges are variable, that means the amount can differ between billing cycles. For example, in the case of your electric bill, the amount charged may change depending on how much electricity you used that month.

    How do recurring charges work?

    You can usually agree to pay recurring charges when you sign up for a service. There may be some instances, however, where you can set an automatic payment for a recurring charge at a later date. Your credit card bill, for example, can usually be adjusted from a manual recurring payment to an automatic recurring payment at any point after authorizing the charge.

    The step-by-step of setting up automatic payments for your recurring charges generally follows the below process:

    • Select a recurring plan: Some merchants may offer recurring charges at different frequencies, such as monthly payments or an annual one.
    • Enter billing information: To successfully set up your automatic payments, you'll likely be asked to provide the merchant with your full debit or credit card information. This usually also includes personal information such as your home and email addresses.
    • Watch for a receipt: Your payment will likely be processed around the same time for each billing cycle, but it may help to keep an eye on your email, which is where the merchant will likely send confirmation of payment. Some merchants may also remind you a few days beforehand that the payment will be coming up soon.

    Pros and cons of automatic recurring charges

    If you aren't sure whether setting an automatic payment for your recurring charges is right for you, consider some potential pros and cons.


    • Convenient: Automatic recurring payments have the potential to take one more thing off your plate, as you won't have to manually pay that specific bill. After inputting your payment information once, you might not have to worry about it again unless you want to change the payment method, for example.
    • Possible savings: On some occasions, you may get a discount for committing to automatic payments.


    • Forgotten charges: If you aren't checking your transactions regularly, it's possible you could end up continuing to pay for something you no longer use. Additionally, you may forget that you have that payment coming up and not be prepared for it, especially in the case of annual charges.
    • Potential fraud: Shopping online may generally be safe, but it is possible that having your information stored with a merchant may put you at risk of having your personal data taken if a bad actor hacks that merchant and gets a hold of your information.

    In summary

    Automatic recurring charges are essentially just charges that process automatically on a specified billing schedule. They can offer consumers convenience by removing the need to manually pay that bill but could also potentially lead to overlooked spending if you forget to cancel payments for a subscription you aren't using.

    Recurring charges FAQs

    Can I dispute a recurring charge?

    Yes, you can dispute a recurring charge. For streaming services, the provider may immediately cut your access if you dispute your payment.

    If you've already canceled your subscription but continue to be charged, it's best to contact the merchant to dispute the charge directly. Be sure you have proof of cancellation readily available.

    Can you block an automatic recurring charge payment?

    While it can vary among issuers, you may be able to block an automatic recurring charge by contacting your bank and revoking authorization for the payment or requesting to stop a payment order. This is generally only successful if the payment has not yet been processed.

    Can you cancel an automatic recurring charge payment?

    If you want to cancel automatic recurring charges altogether, you'll probably have to either cancel your subscription, or change to a manual payment plan. To achieve this, you'll likely need to go through the merchant, either through an online account or by contacting them directly.

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