Should SaaS Companies Require Credit Cards Upfront?

This morning’s episode of “Startups For The Rest Of Us” was all about one of my favorite subjects — should SaaS companies take credit card info when signing up for a trial?

If you aren’t familiar with how SaaS registration and billing typically works, here are the common paths:

  1. Require no credit card. A few days before a trial expires, email the user and tell them to key in their credit card. After their trial expires, lock their account until they pay.
  2. Require a credit card. A few days before a trial expires, email the user and let them know they’re about to be billed. After their trial expires, bill them.

I’ve toyed with both options, and I felt like I wanted to provide a bit of a followup to today’s episode with some of my thoughts around the CC / no-CC debate.

The Mistake Most SaaS Owners Make

Just about everyone who goes from capturing credit cards upfront one day to dropping that requirement the next day fails. Big time.

Paid conversion rates plummet. Revenue dips. And the knee jerk reaction is typically to REVERT ALLLL THE THINGS!

This is what I almost did, until I started thinking about why my growth charts were now “down and to the right”. What was really behind the plummet? Surely the same people who would have plugged in their credit card before were still signing up — right?

The issue is that we usually only change our signup form… we drop the credit card fields. Sure, there’s probably a lot of backend plumbing that needs to be done, and all of your unit tests around billing probably broke in the process. But from the perspective of the user, you haven’t really done that much.

It’s All About Onboarding

You must revisit the way you onboard new users if you drop card requirements. It’s not that you get crappier users when you drop the card requirement; you get less informed users.

When presented with a paywall, most people will do their homework. They’ll read over your tour page in-depth. They’ll checkout your FAQ. They might even Google around for reviews. You’ll get trials that already get the “why”, and they’re now more interested in the “how”.

I think this is why conversion rates are so much higher from trial -> paid when capturing cards upfront (not withstanding the people who miss the “You’re about to be charged” emails.) People are just more well-versed in what you’re doing when they sign up. That’s to be expected.

So if your onboarding is either non-existent or focused on how to use your product, the 10% of visitors who jump into your trial are going to often go in without knowing much about your product. They’ll be dumped in to your app and left to fend for themselves. If you teased them in with a very simple signup form and leave them left questioning why they’re even here in the first place, they’re never going to come back — and they’re not going to convert.

How I Stopped The Bleeding

I’m guilty as charged, and did very little after converting Planscope from capturing cards during the trial signup process to going cardless.

And as I stated earlier, it sucked for my business.

But then I started to rethink my onboarding. I had to get better at explaining why someone should care about Planscope, and not just how to use it. My trial lifecycle emails had to first focus on teaching the user about why good project management matters to their business, and then segue to tying Planscope into that picture after that’s been established.


(With my onboarding, I’m trying to marry the “why” with the “how”.)

My initial onboarding became almost like an interactive tour page, with the added benefit that I now had a new email address that I could influence over time.

Lastly, let me quickly touch on lead scoring. One perk of capturing credit cards upfront is that you get “more serious” and better informed customers. Well, with a little code you can separate the wheat from the chaff in your roster of active trials.


Right now I’m lead scoring based on how engaged someone is. Are they doing stuff that most people do that convert? If so, I’ll do a little higher touch work to seal the deal. (See my upcoming Microconf talk for an exhaustive overview of this.)

Soon I’ll also be introducing something I’m calling “lead value”. I’m capturing qualitative information upfront — Are they a team or solo? Are they designers or developers? A US-based team of developers is worth a little north of $1000 for me. A freelancer in India is worth substantially less. I plan on combining their lead score against their lead value to better optimize who I reach out to.

A Few Additional Pros and Cons

Finally, I want to close with a few quick thoughts on credit card upfront vs. no credit card upfront.

  1. If you’re taking credit cards upfront, people need to cancel to not get billed. You can setup an exit interview to figure out why they’re canceling, which gives you great insights into why they’re not paying you. If there’s no credit card captured on signup, unsatisfied users will just vanish into the aether.
  2. Beware of Gmail tabs. When tabs started appearing in inboxes, I quickly discovered that my “trial is expiring and you’re about to be charged” emails were landing in either the promotions or updates tabs of some inboxes. These tabs are, by definition, less important than the primary tab, and checked less. I noticed a spike in “hey, you billed me before I had a chance to see that you were about to bill me!” emails.
  3. If you calculate churn based on “number of paid accounts who cancel”, your rates will drop substantially. When capturing cards upfront, most cancellations happen a few hours to a few days after that first charge, which skews your numbers. I like how the Freckle team defines a paying customer as someone who pays at least twice, and calculates churn against that group.
  4. When in doubt, ask for cards. To reiterate point #1, you’ll get more cancellations, which gives you more qualitative data. You’ll also get better informed trial users, which can affect your support overhead. Once you’ve dialed in your onboarding, then you should look into dropping the card requirement.

2 Responses to “Should SaaS Companies Require Credit Cards Upfront?”

  1. stympy

    Great insights! I’m also going to touch on this during my presentation at MicroConf. 🙂

  2. chrispa

    Great post – completely agree. I think many businesses don’t take into account the ‘web savvyness’ (if that’s a word) of their customers. As an example, Baremetrics is targeting Saas company owners – of course they are savvy and aren’t going to flinch at providing a credit card. Josh is even able to charge right away and provide a refund if requested. But that’s dependent on his customers understanding how all this works and having confidence that they can get their $$ back.

    My customers aren’t nearly as savvy, and requiring a credit card would definitely be a barrier in getting them to sign up. No matter how much research someone does, that just doesn’t replace the experience of actually using the product. Requiring a credit card would remove those customers who said ‘this is different than I thought…but it’s awesome!’ (And I definitely have a number of those.)

    I’m missing out on the cancellation data, but that just shows there isn’t a perfect solution! 🙂


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