Do You Need a Merchant Account to Collect Recurring Payments?

Fortunately the answer is no.  If you want to set up automatic monthly billing for an advertiser, for example, you do not need a merchant account.

PayPal, the often maligned and equally often celebrated, online payment service makes it really easy.  You set it up once, your customer subscribes and each month a payment to you is automatically made.  Very cool.

I've always figured most people knew about this but during an email exchange with Rocky from BloggingMix I realized there are a lot of people who have  heard of this fantastic tool.  To help out, here are step by step instructions on setting up recurring payments or subscriptions in PayPal.

The only requirement for this is having a Premier or Business account.  Fear not, they are easy to get.  Now, on the the task at hand:

Click the "Merchant Services" tab near the top of the page.

Scroll down and look for the "Create Buttons" heading.

In that column click "subscribe"

Here is where you can set up your subscriptions and recurring payments.

For the subscription name use something self explanatory so you don't have customers emailing wondering what the payment was about.  For example, if you are selling an ad on your site, you'd set it up something like this: 125x125 ad on YourSiteHere.  Of course you'll replace "YourSiteHere" with the actual name or URL of the site on which the ad will be placed.

You can usually skip the reference number, currency and buyer's default country options.  Double check but you should be able leave them as the default settings. as defaults.

Next is "Trial Periods."  This allows you to let customers try our your service for an amount of time you choose before there first automatic payment.  As I'm using the sale of an ad as an example here, I'll skip that.

Under "Regular billing cycle" enter the monthly charge for the ad in that box.

Next, choose YES for "Continue to bill the subscriber for this amount on a recurring basis?"

Length of billing cycle: 1 month in our example.

Choose NO for "Would you like to stop the recurring payments after a certain number?"  You may have reasons to choose YES but NO is the way to go. :-) The customer can cancel at any time so just let it roll.

Choose YES for "Would you like to re-attempt if payment fails for the subscription?"  People will at times forget that a payment is coming up and their PayPal account may be low.  It's not a big deal with this enabled.  I'll cut and paste what PayPal has to say about this:

If you choose "yes" for this option and the payment fails, the payment will be reattempted two more times. After the third failure, the subscription will be cancelled. If you choose "no" and the payment fails, payment will not be reattempted and the subscription will be immediately cancelled.

Next you can choose your button style or, if you just want an email link to send to a new customer, choose NO under Button encryption.  Email links can not be encrypted.

Click "Create Button Now" and grab the code on the resulting page.

All done.

This is another reason why I consider PayPal a friend to small businesses.