How does proration work?
Tom O'Donahoo avatar
Written by Tom O'Donahoo
Updated over a week ago

One confusing aspect of changing subscriptions is how your existing payments are factored into the amount to be invoiced. By default, Atomi prorates subscription costs. If you have no idea what that means, it's easiest to explain it with an example or two, so here goes.

For students and parents

Example 1: Switching between plans with different billing intervals
Hypothetically, if your monthly membership is scheduled to renew on the 1st of each month, you decide to change your plan to a yearly membership halfway through your billing cycle (i.e. on the 15th of April). This means that at the time you make the change, you will have only used up 50% of the month you've paid for.

So if you paid $10 at the start of the month, when you switch to the new plan halfway through that month, we'd give you a credit of $5 (i.e. 50% of $10) for the time you haven't used. This is called proration.

We will use this credit to help purchase your new plan, which, let's say, cost $300 per year. So, in this case, you would be invoiced—at the time of the switch—$295 (i.e. $300 per year minus the $5 you have in credit), and the annual billing cycle begins that day.

If you do this in reverse and your new plan is less expensive than your current plan, the prorated credit will be larger than the new amount due. For example, if you switch from a $300/year plan to a $10/month plan exactly halfway through your billing cycle, you will be issued a credit of $150,  $10 of which will be used to purchase the first month of your new monthly subscription. This means that you will have a balance of $140 of pro-rata credits on your account.

When pro-rata credits are created, they’ll continue to be applied to subsequent invoices until they've been used up. So for our example, if you have $140 in credit on your account, you will use $10 of credit when your membership renews the following month, and your credit card will not be charged at all for that period. This will continue until you have used up all your credit, at which point your card will be charged for your regular monthly payment.

For schools

Example 2: Switching between plans with the same billing interval
Hypothetically if the quantity of licence you purchase on your school plan is changed, we will prorate the cost of this change for you.

For example, consider the situation where your school plan is scheduled to renew on January the 1st each year, and you currently are paying for 1000 users on your account. Let's say that on the 1st of June, you decide that you will require 20 additional users.

Hypothetically if you paid $100,000 on January the 1st, at the time you make the change, we would issue you a credit of $50,000 for the unused 6 months of the year. Similarly, if your new subscription with the additional users will cost $102,000 per year, we will prorate (i.e. decrease) the cost by $51,000 for the 6 months of the year that have already passed. This means that at the time of the change, you will be issued an invoice for the difference, being $1,000. To summarise, this is $102,000 for your new plan minus $50,000 in credit for your old plan and $51,000 as you've only got 6 months until your next renewal.

We calculate the prorated amount down to the second based on the time the change was made to your subscription, using the current billing period’s start and end times.

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