Pro-rated billing

Erin Chesterton October 2, 20241 minute read

She is a PMA-certified, award-winning marketer with diverse experience ranging from Series A startups to Fortune 500s. With specializations in content marketing, product marketing, and... Full bio

What is pro-rated billing?

Pro-rated billing refers to charging customers for only the portion of the service they use within a billing cycle when they make mid-cycle changes to their subscription. For example, if a customer upgrades to a higher-tier plan halfway through a month, they’ll only be charged for the remaining days at the new rate, rather than the entire month.

Why is pro-rated billing important?

Pro-rated billing ensures fairness for customers by accurately charging them for the services they’ve used, which can improve trust and satisfaction. For businesses, implementing pro-rated billing can reduce friction during subscription plan changes, making customers more willing to upgrade or modify their plans. It’s an important factor in reducing churn and retaining customers by offering flexibility in plan management.