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.
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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:
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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:
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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:
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.
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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:
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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.
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