Pro-rated billing

Pro-rated billing

Subscriptions

Charging only for the part of a billing cycle a customer actually uses, for example after an upgrade or a mid-cycle change.

What is Pro-rated billing?

Proration splits a billing cycle by time. When a customer upgrades, downgrades, adds an item or cancels partway through, the system works out what share of the cycle is left and charges or credits only that share of the price difference. Proration is common for digital plans and memberships, where access changes immediately. For physical subscriptions, many brands skip proration and simply apply the new price from the next order, because each delivery is already a complete unit.

Formula

Pro-rated amount = (New price - Old price) × (Days left in cycle ÷ Days in cycle)

Example

For example, a customer upgrades halfway through a $30 month to a $50 plan, so they pay about $10 extra for the rest of the month: ($50 - $30) × 15 ÷ 30 = $10.

Why Pro-rated billing Matters

Fair proration lets customers upgrade anytime without feeling they paid twice, which makes upgrades easier to say yes to.

Explore More Terms

Browse our complete glossary of e-commerce and subscription terms.

Space, at your fingertips

What would you do with 22% more revenue?