Recurring revenue models make it easier to predict cash flow and maintain long-term customer relationships. Once you commit to recurring billing, the next decision is how to collect those payments.
The choice between credit card processing and ACH transfers can have a meaningful impact on profitability, stability, and customer retention.
How recurring billing works
Recurring billing allows customers to pay for products or services in fixed amounts on a set schedule. Payments are automatically withdrawn weekly, monthly, or annually, depending on the agreement.
Customers can authorize charges to a credit card or allow funds to be pulled directly from their bank account using the Automated Clearing House network. While both methods support recurring billing, they perform very differently over time.
Benefits of recurring payments via credit cards
Credit cards remain popular because they are fast and familiar. Authorizations happen instantly, so you immediately know whether a transaction is approved or declined. Settlement typically occurs within one to two business days, which can be helpful for businesses that prioritize speed.
Credit card processing also offers a smooth customer experience, especially for new signups. Many customers are already accustomed to entering card details online, which can reduce friction during onboarding.
Advantages of using ACH payments
For long-term recurring billing, ACH payments often deliver stronger financial outcomes.
Transaction costs are lower. Credit card processing commonly runs between 2.5% and 3% plus a per-transaction fee. ACH fees are usually flat and inexpensive, or capped at a low percentage.
Over hundreds or thousands of recurring payments, these savings add up quickly.
ACH also reduces involuntary churn. Credit cards expire, are replaced, or are canceled far more frequently than bank accounts. When a card fails, subscriptions can stop unintentionally. Bank account details tend to remain stable for years, which leads to fewer failed payments and more consistent revenue.
Fraud and disputes are another factor. Credit card chargebacks are easy for customers to file and costly for businesses to manage.
ACH disputes are more limited and typically only permitted for specific reasons such as unauthorized transactions or incorrect amounts. Fewer disputes mean lower risk and less strain on your operations.
Choosing the right mix for recurring billing
Many businesses find success by offering both options.
Credit cards can be ideal for initial signups, while ACH can be positioned as the preferred method for ongoing payments. Encouraging customers to switch to ACH after enrollment often leads to lower fees and higher lifetime value.
To implement this approach, confirm that your systems support both ACH and credit card processing. Then work with your merchant provider to configure recurring billing rules, notifications, and retry logic that maximize payment success.
Recurring revenue depends on reliability as much as convenience. By understanding when to use ACH payments and when credit cards make sense, you can improve margins, reduce churn, and build a more durable subscription business.
North is a leading financial technology company that builds innovative, frictionless end-to-end payment solutions designed to simplify and grow businesses of all sizes. From the front door, to the back office, the developer world, and partnerships that expand the payments landscape, North offers proactive, comprehensive merchant services, in-house processing, and more.
