How does the proration work when I upgrade my subscription plan?
If you already have a paid subscription and you are now planning to upgrade to a higher plan, you may want to know what happens to the payment you already paid if you have not yet finished the month or year (depending on whether your subscription is monthly or yearly).
Our billing system has a proration system based on credits and duration. Meaning, when you upgrade, the system looks at how much of the billing cycle and credits are left, and based on that, calculates how much of the previous payment should be deducted from the upgrade invoice.
Let's look at an example: Assuming you had a monthly Starter plan that you paid $48.75 for and then, after 15 days of usage, you had 200 credits out of 2,000 left.
The system sees that 50% of the month and 10% of the monthly credit are left. It then uses the minimum of those two numbers and multiplies it by the payment you made: 10% x $48.75 = $4.88
When you try to upgrade, if the new plan is Professional 5,000 and it is $123.75 per month, you will be charged $118.87 on the first invoice ($123.75 – $4.88), essentially getting a refund for the remaining credits and/or duration from the last subscription cycle, and your billing cycle resets to start on that date. Your credits will also reset to 5,000 immediately. Moving forward, your future invoices will be for $123.75 per month.
Why the proration uses remaining credits as well and not just the remaining time
Imagine someone upgrades to a plan with 120,000 credits, then uses all those credits in 1 day, and upgrades to a higher plan. If the proration was solely based on the amount of time passed, they would get almost the entire amount they paid (29/30 of it) back on the next invoice despite having used all the credits they had purchased which has a significant infrastructure cost for the provider. Therefore, we have to factor used credits into the proration calculation as well!