Handling pro-rated upgrade/downgrades

I'll be handing recurring billing with pro-rated upgrades/downgrades. Although upgrade seems simple, but I'm unsure wether to provide a refund incase the remainder amount exceeds the required total for the upgrade.

So for example:

• Plan A: $10/m ($0.33/day)
• Plan B: $90/yr ($0.24/day)

UPGRADE: User is subscribed to Plan A and after 21 days he decides to upgrade to Plan B :

• $10 - ($0.33 × 21 days) = $3.07
• $3.07 + $86.93 (charged on upgrade) = $90 will upgrade him to Plan B

DOWNGRADE: User is subscribed to Plan B and after 21 days he decides to downgrade to Plan A :

• $90 - ($0.24 x 21) = $5.04
• $10 - $84.96 = -$74.96

So my question is what is the standard practice for refunding the downgrade remainder? I have no problem refunding but since my gateway doesn't refund the transaction fees, I'll have to bear it which is not possible.

I'm thinking of allowing pro-rated upgrades only, downgrades only from the billing cycle, does that make sense?

Thanks!

For upgrading your account, I would say either the same day or at the next billing cycle would be fine. As for downgrades, I wouldn't allow it until after their cycle has ended.

Reason is - you paid a (yearly) amount to save money. If you weren't sure, then you shouldn't have went into a one year contract.

As for the business owner, this is were a trial for a day or week comes in handy to sell those long-term subscriptions. You as the owner get the money up front. This money is used to invest into your business.

Your policy of "allowing pro-rated upgrades", and "downgrades from the billing cycle" only makes sense. I suppose that you are facing the mental block of "dont be evil" while putting this in your Terms&Conditions, but believe me- the mental peace of lesser operational overhead will be negligible if your product is good-Users will ignore that minute detail and it won't be a blooper.

Or,
You can also let users opt-for "adjust the remainder in my next month's bill" ; in this case, the user will pay next month=downgraded rent - remainder.
Only one exception will be there: in-case an user stays for 1 downgraded month, then wants to exit with refund, at that time only, you can opt present him with option to "Deactivate my account and refund my $XX" instead of "Deactivate my account".

Presumably, the reason you have two different plans is because you want the certainty of having somebody in there for a longer time and are willing to give them a reduced rate for that certainty. Allowing them to go from Plan B to Plan A doesn't do that.

Say, after 1 month, somebody on Plan A wanted to switch to Plan B, and then cancel. Instead of paying the monthly rate of $10/month, dropping down would allow them to pay only $7.50/month.

So, no, you shouldn't let customers down-grade.

You can add the additional amount as credit to customers account and later use it for next billing cycle.