Why I’m Going Back To Capturing Credit Cards Upfront

One of the best side effects of founding a software company is the sheer number of experiments that are required to maintain a healthy growth trajectory.

Do I onboard new users with a video overview, or a guided tour? Should the marketing site target consultants or freelancers? Single page or lots of pages? Screenshot of the app or picture of a smiling family?

These are the sort of things that were almost impossible to explain to my salaried self from just a few years ago. Back then, I was paid to write code, and there was enough middle management in place to mask what the effects of this code were to the business I worked for.

But these days, the experiments I run directly affect my bottom line, which in solopreneur terms means the family budget for buying kids clothes or how often we treat ourselves to a meal out each month. No experiment has been as hard hitting as my last, which was: Should I collect credit cards upfront, or wait until trials expire?

This is a hotly debated and controversial topic in the SaaS world. On the one hand, the window shoppers who tend to bog down support are gone — which is especially nice when you’re also the entire support department. And you get more engagement during trials, as I’ll talk about later. But conversely, some people simply won’t give up their credit card when the outcome is uncertain, no matter how many “we won’t bill you now, promise!” and refund guarantees are in place.

I’ve found, though, that the heart of issue is the fact that if your trial user — who might, like many trial users, sign up and never come back — either misses your trial expiring soon email or ignores their inbox for a few days, they’re going to get billed automatically. And this immediately makes some people feel like you’re the scum of the earth (even though they agreed to be billed if they don’t cancel within X days.)

The sort of emails you get when charging automatically

October, 2012: Switching from no-CC to CC

Last October, I added credit card fields to Planscope’s sign up form. Immediately, my growth rate doubled. Achieving 2x growth didn’t require any special new features or enhancements — just a few backend billing tweaks.

And I let this ride for about a year, and maintained a consistent month-over-month growth rate. I’d occasionally get a refund request, and there was a definite spike in cancelations right after that first payment went through. (Conveniently, lots of people seem to miss/ignore the “Your trial is expiring and credit card will be billed” emails, but no one ever misses the “Billing receipt” emails that come a few days later!)

Gmail’s new tabs made things even worse. My trial expiration emails would end up in either the “Promotions” or “Updates” tab, which by definition are low importance. And since I was emailing 3 days before their 14 day trial expired, the amount of people who flat out missed this email went through the roof. Refunds rose, and since I’m still doing this manually via the Stripe UI, my administrative overhead went up.

September, 2013: Reverting back to no-CC

Around this time, I ditched Mailchimp for InfusionSoft. I’d always been pretty good on the “infoproduct” side of my business when it came to email marketing, but I was lucky to send out one or two emails a year to my Planscope list. And my lifecycle email sequence was pretty much: “Welcome from the founder” -> “Your trial is expiring” -> “Billing receipt”.

Infusionsoft Campaign Sequence

I decided to get more customers into Planscope, hook them up on a free educational drip sequence, and get people into the product with as little friction as possible. I spent some time reworking the guided tour, and included a sample project for new users to play with. It seemed bullet proof. I’d get more people to use the software, I’d have more people to teach things to, and once I had people in the software inevitably conversions would skyrocket. Right?

Sure, I’ve been adding a lot more emails to my CRM, but I only added 15 new customers last month — and before the switch, I’d been averaging around 30 to 40. And with churn factored in, I had my first month of negative growth in over a year.

There’s something else I’ve missed over the last month, which has really affected my ability to grow the product. People just… disappear. When asking for credit cards upfront, people need to cancel if they don’t plan on continuing. And when canceling, I ask people why they’re leaving. The amount of data I’ve collected since requiring a cancelation reason has been instrumental in the growth of Planscope. Sometimes the problem was environmental — either the customer didn’t have a new project, or they got a full time job — or something related to the product. But more often than not, they told me what was wrong. “Inviting my clients is confusing” or “I ran into a bug when rearranging tasks”. These are things that I probably wouldn’t have ever heard if I didn’t these cancelations, which are typically written at the high water mark of a user’s emotional relationship with your product.

Cancelation Screen

When trial users just disappear, you have no idea why they didn’t convert. Which severely affects your ability to retain people like them in the future. This alone is enough to cause me to rethink my decision to abandon capturing credit cards upfront.

November, 2013: Returning to capturing CCs upfront

It’s clear that abandoning asking for credit cards upfront has negatively affected my business, even with the added attention given to initial onboarding and the overhaul of my lifecycle sequences.

Here’s my hypothesis: When you ask for a credit card upfront, the trial customer takes your product more seriously. They know the relationship is “I pay you money (as I’ve already intended to do when signing up), and you provide me value.”

They become more engaged. They’re more likely to actually battle test the product and make an effort to incorporate it into their business. Once someone sees the value of your product and is able to fully adopt it, they’re going to convert. When they don’t, they cancel, and have a 90%+ chance of giving you a legitimate reason why.

Rather than making a clean revert to the old registration system, which had new users plug in their credit card and kick off a 14 day trial immediately upon signing up, I’m going to find the middle ground.

1. Keep the current “squeeze page” version of the homepage

The homepage of Planscope makes it super simple to create an account — all you need is an email address and password. I get a handful of fake addresses, but for the most part I capture legitimate email addresses that I can kick off a drip campaign with.

Squeeze page version of the homepage

I average about a 8-10% conversion rate on this page, which means I’m getting 10x more email addresses. I can teach these people how to become better consultants, and how Planscope can help them do that. This allows me to build up trust over time, which is often necessary before asking for someone’s credit card.

2. Keep the current onboarding and sample project

The guided walkthrough and sample project are the interactive equivalent of a video walkthrough on the marketing site. People can play with the interface, create tasks and milestones of their own, and more. They can’t, however, create their own projects or estimates or invite anyone — which means it’s impossible to derive any sort of business value out of the sample project.

Planscope Onboarding

3. Creating your first project or estimate asks for a CC

When creating your first project or estimate, which will allow you to invite in a client or team member, I’ll then capture a credit card. I’m also betting that people who get to this stage — who have already taken the guided tour and experienced the product — will be much more willing to kick off a trial (vs. someone who’s complete interaction has been screenshots on the features page.)

I’m also going to bump up the trial length to 21 days, and I’ll be sending the trial expiration email 7 days beforehand. This should help eliminate the problem with people not seeing the expiration emails in time, and allow me to expand the trial lifecycle email sequence. (And I’ll finally start getting those cancelation emails again!)

Will this work? I’m not sure. But it’s the next big experiment I’m kicking off, and it’s the result of looking at a lot of data and making assumptions. I was wrong before, and might be wrong again. I might end up reverting back to asking for credit cards on the initial signup form.

37 Responses to “Why I’m Going Back To Capturing Credit Cards Upfront”

  1. Luisafer

    I have absolutely no problem in providing my CC up front to try a product and if I leave I will nomally provide a reason unless I couldn’t understand at all what the product was about or as it happens to me more often than not is that I’m better with pen and paper. Web apps are sooooo full of features that one doesn’t really need.

    As a freelancer I really need to shop around for the best possible solution for myself and yet I don’t need too many, I just need ONE that will help my workflow so if I’m looking for a project management system I need to try several.. I guess if one is really interested in the product the CC up front will not be an issue but bare in mind that leaving CC numbers all over the internet even with all the security and whatnot isn’t what most of us potential customers want to do.

  2. Justizin

    “even though they agreed to be billed if they don’t cancel within X days.”

    This is a horrible incarnation of fine-print attitude. Your product couldn’t keep me interested, and I couldn’t even smell or really look at it without giving you a payment method. I never benefitted from it, you kept a row in your database for me.

    Yes, you are the scum of the earth. Create a compelling experience.

    Even with no CC up front, this entitled attitude is very common. I have a number of vendors who harassed me every day during their trial period, pushing me into sales calls and walk-throughs from which I gained nothing, and which spent up all of the time I could have used to evaluate their product. We already use a differentiating product, their only way of fighting for our business is to give us a trial that costs nothing until we begin evaluating it, with an expiry, and then to threaten to ‘reduce’ our services. I probably won’t end up paying these companies money in the long-run.

    Some other vendors have patiently worked to figure out why I’m not engaging with their product, though it offers features that should make my life easier. They might wait longer, but they will likely get paid, and when I run into them at an industry event, I will buy them a beer.

    • Justoutzin

      As a business owner he’s trying to grow his business. That doesn’t mean he’s trying to pilfer your pockets by charging you for a product you don’t want. He’s deterring ‘window shoppers’ as he calls them, which are a major concern for a small business.

      Alternatively, he allows window shoppers to bog down his workflow, provide zero valuable feedback, and detract from his ability to tend to what really matters: paying customers.

      Why, on earth would a company “patiently work” to figure out why every free-trial user is not using their product? If you’re not going to use it after the trial period – don’t waste a company’s time and cancel the trial. If you might actually use the product if there were some changes made – contact them during the trial period – and cancel the trial if you are unsatisfied with the company. That way the company can work with potential customers that actually want to work with them – not entitled twits who just want a company to pander to them.

    • jasonshen

      Scum of the earth? A little harsh.

      This is a standard business practice, somewhat akin to restaurants adding 18% mandatory gratuity to group bills. Whether you like it or not, it is how many SaaS products bill and complaining about it simply makes you look inexperienced.

      If you aren’t ready to try the product seriously, don’t put in your CC. If you used the product and liked it, keep going. If you used the product and it is not good, then you cancel. He even emails you beforehand to remind you that your trial is expiring.

      Unlike the pushy vendors you describe, Brandon is giving you the free trial. It does cost nothing, until the trial ends, at which point it is your responsibility to cancel if you don’t like it. Otherwise, the assumption is, you like it.

    • robertwilliams88

      “They might wait longer, but they will likely get paid, and when I run into them at an industry event, I will buy them a beer.”
      Two big assumptions there:
      1. You assume they will eventually find value in it and pay you (statistics/data show you’re wrong).

      2. You assume I’m dying to drink beer with you at an industry event (I am not).

    • Michael Hopkins

      You are wrong about so many things.

      1. Planscope is self-serve software. If you put in your card, you did it on your own. If you signed up, you did it on your own. Nobody called you. Nobody gave you a hard sell.

      2. Planscope has a free trial. It says this. You know what a free trial is. You know how this works. Everybody does.

      3. Planscope tells you it’s going to charge you in a really obvious way. It even sends you email about it.

      4. Brennan, who wrote the article you’re reading, seems to make himself overly available. You have every opportunity to talk to him and make it work. You could probably even get your free trial extended if you just bothered to ask.

      5. Brennan gives refunds to people who forget. His business model isn’t about people leaving accounts sitting around. It’s right in the article you just read.

      6. You aren’t actually willing to pay for software that does what you ask. If you don’t come across a limit, you’ll never pay. The data on this says time and again that if you actually did pay if given an unlimited free trial, you’d be a very special person.

      7. You probably don’t buy many people beer, either. Most people don’t, and you sound a bit stingy.

    • tomandyourmom

      Wow, you’re so wrong that you’ve actually circled around the earth and back up your own ass. _YOU_ are the entitled one, Justizin. You can’t be bothered to cancel something that you signed up for, and are upset when they DO WHAT YOU TOLD THEM TO DO? Wow, you’re one of the laziest and most entitled people I’ve ever met. And that’s saying a lot, as I live in London.

  3. Matthew Bradley

    Barring Stripe, I think this is the first time I’ve seen a SaaS product provide the old-school style demo accounts in a long time. I’m looking forward to reading the write-up of your results!

  4. Alex Dowad

    I’m not interested in subscribing to online services which require a credit card; if I need to use a service, I’d rather pay by PayPal. I wonder how people like me fit into this picture.

    • Douglas Mak

      Why are you not interested in subscribing to online services which require a credit card?

      • Kyle Sanderson

        You really trust your credit card to miscellaneous online services that you may or may not use?

        • Brandon

          Yes. That’s the whole point of having a credit card; you have zero liability.

          • Kyle Sanderson

            And that’s what’s wrong with society today.

          • Brandon

            No, it isn’t. If you’re not able as a merchant to handle the risk of accepting credit card payments, *don’t accept them*. As a business owner, I build the cost of refunds and chargebacks into my pricing, as any business should who takes credit cards.

            You can always try to pay cash for an online service. Good luck with that.

          • Kyle Sanderson

            I wasn’t really looking to go back and forth, but alright. Paypal exists because it’s a trusted method. Giving a raw credit card over the internet to a vendor is usually bad voodoo. I only use Paypal for donations, I wouldn’t give someone my raw card. Google Checkout, and many others exist for this reason as well. Stripe is still pretty scary to myself, it’s possible I’m alone, though.

            I’m not against people carding, I just know I’m not the person to trust an unknown entity off the bat. Especially before I can try the product, as from my understanding of the article, is what you’ve went back to.

          • Jesse

            Vendors using stripe don’t store your card information.

            Granted, they can bill against the card, but they can’t go willy-nilly or bill from a different name later.

          • Kyle Sanderson

            I’m sorry I totally forgot that. Good point!

          • Rob Adler

            Also, just to point on this, if a vendor is PCI compliant (basic) enough to accept CC’s they can’t (according to the compliance… doesn’t mean they don’t sometimes, though) store your CC information, either.

            I know for us, we accept the CC on the page and directly API it to Authorize.net to be stored. We never store it in any database, etc. It’s stored there, and we get a token. Just like stripe.

          • Douglas Mak

            Paypal does not exist because it’s a trusted method; It became trusted after it existed. It exists because it solved a problem and allowed businesses/people to send and receive money over the internet without having to go through the hassles of applying for a merchant account and being subjected to PCI compliance.

        • Douglas Mak

          Well that depends, Alex made a very general statement, and I think services such as Planscope, Github, Netflix are trustworthy and I don’t mind giving these services my credit card information. Furthermore, if the service is interesting to me and is using Stripe or any other reputable payment gateway service, then I would feel more comfortable. Don’t get me wrong, I won’t just give my credit card information to just anyone though, but I’m not going to dismiss an online service entirely based on a single reason such as it requiring my credit card.

        • David

          If you don’t trust an entity, why would you be working with them to begin with? In addition, like Brandon notes — that’s the point of a credit card: fraud protection.

          • Jim

            You may trust them to not personally steal from you, but do you trust them to have good security practices.

          • David

            Which is precisely why you’d want to use a credit card which offers fraud protection.

        • Tanner

          You’re trusting someone with your card either way. In fact, with PayPal, you might be trusting them with your bank account numbers. As it stands, and considering my past experiences with PayPal, I might rather trust a stranger…

    • Mason Gup

      It looks like a business product, meant to boost your productivity. I’d guess that if you don’t think it will boost your productivity and effectiveness orders of magnitude more than what it costs, enough that you don’t really care much how you go about paying them, then it isn’t aimed at you.

  5. Andrew

    A good best-of-both-worlds scenario that I’ve seen has been to extend the free trial period (usually by another month) after a CC is added. It makes the conversion process more of a slowly boiling pot. Nodejitsu had this approach, I think.

  6. Anonymous

    If when asking for the CC a site would say “Don’t worry, we will remind you 3 days before we bill you and if you’re really not using my product we’ll process timely requests for a refund”, I’d be much more inclined to sign up. Yet I’ve never seen a site that does that. While Brendan does the right thing in both sending a warning message and then issuing refunds anyway to people who are not using his site, I’ve experienced the opposite behavior and I suspect most of us have.

    • Brennan Dunn

      Check out: http://planscope.io/pricing

      Right now it reflects that I’m NOT capturing cards upfront. Before stated I’d be emailing 3 days before their trial expired.
      Likewise, this was reiterated prominently on the old sign up page.

      Completely agree, though. I can’t build a business off one-off customers and shitty service.

  7. workhabit

    Good article. I would set up a/b testing, and figure out what’s up! This is a job for scenario-based testing!

    • Brennan Dunn

      Hmm, the comment posted here is different than what was in the comment notification email, but I’ll reply to that.

      I wouldn’t say the “house is burning” with a 15-20% month over month growth rate in revenue. What happened, though, was one specific change led to a stagnation in revenue. So now I’m just reverting that change so I can get back to positive growth while I plan my next set of experiments 🙂

      • workhabit

        Yea, I removed the longer version. The comment above is what I decided to post as I didn’t like my own tone. 🙂

  8. Greg Robertson

    Thanks for the great post Brennan. My educated guess is that you are going to go back and ask for the credit card much earlier in the process.

  9. Matt Hammond

    Yes, I too am very hesitant to offer a credit card upfront – as mentioned, those reminder emails often end up in the SPAM folder; often these are generated by the website itself, while the payment receipts are generated by the payment gateway providers themselves.

    Another approach I’ve seen is to NOT collect the credit card upon initial signup, but to then send promotional offers BEFORE the end of the trial period offering a significant discount if the user signs up within a specific window of time (show a countown timer).

    Certainly a good insight into the issues and challenges facing any small startup trying to figure out how to best explain and sell their service to new users.

  10. Trent Dyrsmid

    Brennan, terrific post. Thanks very much. I’m sure this is something Nathan and I will be discussing regarding ConvertKit. I’m sure my audience would also enjoy this post, so if you’d like to syndicate it to me blog, please get in touch.

  11. jaredbrown

    Hey Brennan, I was wondering if you have posted an update to this experiment. I’m curious how things are going now that you’ve gone back to requiring a credit card upfront. Are the refunds requests still a drag? Thanks!

  12. Michael Nolan

    Hi Brennan – thanks for this post, very helpful. 1. Regarding the Gmail tabs issue – a service I signed up for asks in email #1 that the new user (me) mmediately reply to the email and tell the sender what you are trying to achieve so he can point you in the right direction and “It will help make sure my emails reach your inbox and you’ll want that because I’m going to send you a few emails with real tips and real information that you can start putting into practice almost immediately.” 2. Would also like an update on this experiment. Thanks, Michael


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