Mastercard Recurring Payments

June 15, 2022 | 11 min read

Mastercard Recurring Payments

Mastercard Recurring Payments Rules: Free Trials, Negative Options & Other Practices

“Free Trial” promotions are a surefire way to connect with customers and promote your products. You enjoy a reliable source of revenue coming in on a regular basis. In exchange, customers get access to goods or services they want without the need to remember monthly payments or renewals. It can be a win-win.

What about the fine print, though? How do card networks like Mastercard deal with negative option billing and free trial subscriptions?

This article will explain the basics of Mastercard recurring payments, including subscriptions, negative option offers, and more. We will also break down Mastercard free trial rules and provide subscription best practices for you to follow.

Mastercard Subscription Billing At a Glance

Mastercard offers a few different recurring payments and subscription-based payment options for eCommerce merchants. To better understand their rules and regulations, let’s examine what each term means:

Subscription Billing

Any service that promotes Mastercard recurring payments in exchange for consistently delivered goods or services.

Free Trial

Free trials are offered to cardholders to “try out” or sample goods or services that they might be hesitant to buy outright. Free trials may terminate with a full purchase of the item or service, or could be used alongside other offersings like a subscription.

Negative Option Billing

A subscription service in which cardholders have a right to use a service, but can cancel or decline up to a given point in the user agreement. If they do not do so, they agree to be charged for that service.

Mastercard recently supplied a few subscription billing updates in November 2021. Other changes are set to take effect in September 2022.

Mastercard has mandated that agreements include the trial terms, the amount and regularity of future payments, and due dates. These details must be made visible on the checkout page. Also, a copy emailed to the consumer at the point of payment.

Mastercard’s rules ensure that merchants don’t bury any crucial subscription or payment details in their terms of service. Consequently, the rules ensure that buyers receive those details in full. If both parties have provided and received the information required to enter into any subscription agreement, then the risk of buyers filing chargebacks is significantly lessened.

Mastercard “Free Trial” Rules: The Fine Print

Most changes specifically impact negative-option and “free-trial” merchants in order to give cardholders time to cancel before billing goes into effect. These rules also require merchants to remind cardholders of upcoming payments if a free trial offer was made, and that a cardholder’s written consent is required for all subscription agreements and transactions moving forward.

The Mastercard recurring payments rules we’ll discuss today cover five main categories you need to know about: applicability of the rules, creating accounts, processing payments, informed disclosure, and canceling subscriptions. These rules break down as follows:


Offering a free trial of your product or service doesn’t necessarily mean you'll be subject to these rules. The Mastercard negative option billing rules below apply to merchants who are engaged in all of the following practices:

  • Collect cardholder information at the time of a free trial.
  • Enroll customers for a subscription through a free trial offer.
  • Sell physical goods, like health and beauty products.

Account Creation

Mastercard provides guidelines regarding the creation of new user accounts. These Mastercard recurring payments rules apply to merchant classification and information authentication.

MCC Classification:
All merchants using this business model will automatically be assigned the merchant category code 5968 (Direct Marketing – Continuity/Subscription Merchants).

High-Risk Status:
Merchants who use the subscription billing model will be designated as a high-risk merchant. This can entail higher fees, costly regular account reviews, and other restrictions on your processing ability.

MRP Compliance:
All merchants who use the negative option billing model must register their merchant credentials and contact information with the Mastercard Registration Program, and agree to all of Mastercard’s usage terms.

Payment Processing Rules

These Mastercard recurring payments rules concern first and subsequent subscription payments. They also cover how you should handle failed authorization for subsequent charges.

Free Trial Start Date:
If you provide free trials, the trial period must begin the day the customer receives the product or service. If a customer cancels service, you need to confirm in writing that the service has been terminated.

First Payment:
When the trial period ends, but before you charge the card, you must share all relevant information with the cardholder, including:

  • The amount to be charged
  • The date the charge will take place
  • If the card is declined, a secondary date that you will attempt to process the transaction again
  • Your billing descriptors and contact details
  • Instructions for the cardholder to unsubscribe before the first payment date
  • The cardholder must provide written confirmation (via a contact form or electronic signature) that they have agreed to your terms and conditions.

Subsequent Payments:
All your payment details, and those of the cardholder, for descending payments must match the credentials from the first payment.

Failed Authorization:
If payment authorization fails at any point during the subscription period, you must send the cardholder a notice explaining why authorization was declined.

Multiple Transactions:
If a cardholder’s account credentials are used to process transactions across multiple merchant accounts, authorization should be declined unless documented consent is provided by the cardholder.

Informed Disclosure

Mastercard requires that you clearly state the terms of any trial offers upfront at the point of payment.

In the eCommerce space, this refers to the screen at which the cardholder is required to enter their credit or debit credentials. It also applies to any screen at which you provide a summary of the buyer's order for final authorization before checkout.

Again, this disclosure must take place on the relevant page. Providing a redirect link, or anything which requires scrolling in order to view the disclosure, does not fulfill the Mastercard recurring payments requirements.

Subscription Cancellation

Termination of a subscription billing arrangement is not ideal…but it’s better than a chargeback. Regarding the cancellation of subscriptions, Mastercard has put these guidelines in place:

Cancellation Policy:
All information regarding how to cancel service must be clearly listed on your website, along with their subscription terms and conditions. Both must be accessible via a URL link, and copies of both must be provided to the cardholder before and during the service period.

Cancellation Policy Repetition:
Copies of the cancellation policy must be provided to the cardholder each time authorization for Mastercard recurring payments is requested. This information must repeat instructions for cardholders to cancel the subscription.

Cancellation Confirmation:
Written confirmation of cancellation must be supplied to the cardholder after the subscription service is canceled.

Confused? We’ve got you covered. Click below and learn how Chargebacks911® ERT Notifications can eliminate chargeback triggers.


Other Best Practices for Mastercard Negative Option Billing Compliance

So, beyond basic practices outlined explicitly in the points above, what else can you do to ensure compliance with Mastercard recurring payments rules? Here are some best practices:

Inform the Customer

Once a free trial period expires, you can no longer simply roll over into regular billing without notice. You must get explicit permission from the customer before charging the card. You also need to provide all the following information to the buyer to ensure they can make an informed decision to continue service:

  • Total Transaction Amount
  • Date of Transaction
  • Merchant’s Name, as It Appears on Statements
  • Instructions for Terminating Service at Any Time

Begin Trial Periods at Reception

At one time, you could offer a timed trial period, and begin the trial as soon as the customer completed a transaction. Now, eCommerce trial periods must start on the date the customer receives the product.

For example, if you offer a free 30-day trial, the Mastercard negative option billing can’t kick in until 30 days after the customer receives the sample. In most cases, this will require you to use delivery tracking and confirmation to determine when the trial should start.

Provide a Cancellation Link

The new rules also demand you provide customers a direct link to an online cancellation procedure. This page needs to be on the same exact website where the customer initiated the trial.

The purpose of this rule is to prevent merchants from trying to create barriers to cancellation by hiding the relevant online form.

Comply With the Stored Payment Credential Mandate

You need to comply with the Mastercard Stored Payment Credential Mandate.

This ruleset stipulates you inform the customer’s issuing bank (via transaction) that their payment credentials are being stored. You’ll also need to use appropriate indicators for transactions based on stored credentials. You can contact your acquiring bank for specific details about complying with this ruleset.

The Connection Between Recurring Billing & Chargebacks

Mastercard’s negative option billing rules reflect some practices you should already have in place. For example, ensuring the customer is fully informed about their trial offer is a sensible, even-handed requirement. Not only is this practice a good way to ensure customer satisfaction, but it can also help you prevent recurring billing chargebacks.

If a customer doesn’t want to be billed for continued goods or services, it’s best they cancel upfront. Otherwise, you run the risk of that person filing a chargeback months down the road. In many cases, when a customer files a recurring billing chargeback, the bank overturns not just the latest transaction, but every transaction since the beginning of service.

Of additional concern is the fact that all merchants engaged in the negative option model are now viewed as being at higher risk for chargebacks.

High-risk merchants face more obstacles in day-to-day operations, including higher fees, costly account reviews, and more. Plus, there are still other chargeback risks to watch out for… namely, friendly fraud.

Prevent Mastercard Recurring Billing Chargebacks

Here’s the plain truth: complying with Mastercard’s negative option billing rules can help you prevent some of the recurring billing chargebacks you receive. It won’t stop them all, though.

As long as you buy and sell goods using a Mastercard subscription or Mastercard recurring payments model, your business will attract chargebacks. That said, you can still enjoy the benefits of negative-option billing without the drawbacks and headaches that come from chargebacks.

We recommend that you:

Be Up-Front

Ensure your subscription policies, including your terms and conditions, are provided to your customers at checkout. The “three C’s” of writing a customer policy should be “clear, concise, and comprehensive.”

Follow the Rules

Trying to get around card network rules is simply bad for business. To provide the best customer experience and maintain a stellar reputation, abide by network rules and guidelines at all times.

Send Reminders

Billing reminders should be emailed to the customer at least one week before billing is processed. This is true, even if their due date is months after the trial. Each reminder should also include a link to cancel the service if the customer prefers to do that.

Ask for Help

The best thing you can do to remain network compliant and protect your business from chargebacks is to develop and maintain a comprehensive chargeback management strategy.

Want to just serve your customers, and leave the Mastercard negative option billing rules and other complicated regulations to someone else? Chargebacks911 can help. Click below and get back to what you do best: making money.

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