What is Proration?
Definition
The calculation of a proportional charge or credit when changing subscription plans mid-billing cycle.
Understanding Proration
Proration ensures fair billing when you upgrade, downgrade, or cancel a subscription in the middle of a billing period. If you upgrade from a $10/month plan to a $20/month plan halfway through the month, you would be credited $5 for the unused portion and charged $10 for the remaining half at the new rate. Not all services handle proration — some charge the full new amount immediately or wait until the next billing cycle.
Understanding proration helps you time plan changes to minimize costs.
Related Terms
Billing Cycle
The recurring time period between billing dates for a subscription service, such as monthly, quarterly, or yearly.
Tiered Pricing
A pricing strategy where a service offers multiple plan levels with different feature sets and price points to serve different customer segments.
Subscription
A recurring payment arrangement where a customer pays at regular intervals to access a product or service.