PayPal: What is the difference between a Subscription and a Billing Agreement?

Paypal is a name that has become synonymous with sending money, given their online payments system in the majority of countries that support online money transfers, and serves as an electronic alternative to traditional paper methods such as checks and money orders, especially in an online world that often sees us doing vendors with businesses all over the world. 

Paypal makes it easy to pay invoices instantly without having to worry about additional international currency conversion fees, credit card fees or other administrative hassles that can easily become a burden to dealing with vendors.  

Paypal has even taken that one step further to allow payments to be simplified even more with two different options for automatic payments that allow you to set and forget.   These are the Paypal Subscription and the Paypal Billing Agreement.  

While they are similar in some ways, in that they can be set up and you can just let them do their thing, they are also very different in terms of how each one handles payments.

Paypal Subscriptions:

A Paypal Subscription is a great way to create stable, regular payments of the same amount, usually on a per service basis.  The first payment is deducted from your chosen payment method on the day you create the subscription.  After that, the same amount will be paid on the same day every month.  

This is a great option if you have one single service with a constant payment amount every month.  It’s easy to set up, as you can read in our guide here:  How To:  Set up a Paypal Payment Subscription.

Now, this is great if the amount you want to pay never changes, but this kind of payment can have drawbacks.  What happens if you upgrade your service?  What happens if you add additional services?  Remembering to go back in and change your subscription amount can be something that has been easily overlooked when you’re busy running your business, and can lead to inadvertent downtime if your payments aren’t made in full and on time.  

Paypal Billing Agreements:

A Paypal Billing Agreement is a great alternative to using a Paypal Subscription.  While they are functionally similar in that they are automated payments that you sign up for, they are vastly different in the way that they handle your account.

A PayPal Billing Agreement functions much more like keeping a credit card on file for automated payments.   The agreement is set up just as easily as a PayPal Subscription, as you can see in this guide here:  How To: Add a PayPal Billing Agreement

Unlike the standard PayPal Subscription, the payments are not restricted to a single payment of a standard amount each month.  Instead, every time your invoice is due, the billing management system will automatically process your payment through PayPal on the day it is due, leaving you to easily ‘set and forget’.  

It doesn’t matter if you upgrade, downgrade, add services or take services away from your account, each invoice will be paid on the day it’s due leaving little to no risk of interruption to your services because of billing issues.  

A Paypal Billing Agreement is a great alternative for those who don’t have credit cards, who don’t want to deal with pesky international currency conversion fees or just don’t want to keep a credit card on file in the billing management system, yet still allows the ease of regular set and forget payments leaving you to get back to what really matters, running your business!

So, there you have it!  A quick review of the differences between a Paypal Subscription and a Paypal Billing Agreement!  

I hope you’ve enjoyed this most recent addition to our ‘informational’ guide, all designed to help make managing your business easier.  

Please make sure you check back on our blog regularly as we will be doing more of these ‘informational’ posts to help our customers navigate through their customer portals.