Should I Ask for a Credit Card Up Front?

One of the most common questions I get about trials is whether or not you should require a credit card up front.

Dropping the credit card requirement is an attractive option because you can get ten times as many trials if you don’t ask for a credit card. Although I typically default to asking for a credit card up front, it helps to understand the pros and cons.

Entering a credit card is a qualifying event. A person willing to enter a credit card has more interest in your product than someone who won’t, and it reduces the number of tire kickers in your sales funnel.

This is important because all those free trials can actually be pretty expensive. If you’re bootstrapping, you probably don’t have the funds or time to manage support and onboarding for people who are not likely to convert.

When thinking through requiring a credit card up front, ask yourself:

• How high is my support burden for each customer going through the trial?
• Do I have the bandwidth to multiply my support burden by 10, knowing there will be many more tire kickers?

A lot of first-time founders tell me they don’t want to require a credit card because they want to get as many people as they can into the app to learn what people want.

The problem with this approach is you end up getting a bunch of noise from users who aren’t your core customers. Instead, you end up with an unfocused group chattering about different things. You don’t know who to listen to, making it hard to focus on the next feature you should build.

Of course, there are always exceptions.

If your product is often adopted by employees who don’t have company credit cards, you may want to drop the requirement.

A good example of this would be Slack, Trello, or Dropbox, which have freemium levels and trials that anyone can set up. Team members can set up an internal Slack group without having to get approval from a manager with a company credit card.

Once your initial champion and their team start using your product at work, they’ll see how valuable it is (and probably want to add integrations). Then, they can make the case to their manager to break out the company credit card and upgrade to the pro version.

If you’re not in that situation but are having trouble getting people to sign up with a credit card, the answer probably isn’t to drop the requirement. Instead, make sure you’ve built something people want and learn how best to market it.

As I said, my default recommendation is to require a credit card up front. But I’ve seen founders decide at a later date to open the floodgates by removing the credit card requirement. Here’s what these founders had in common:

• Their companies were early but established.
• They had more than $20,000 MRR.
• They knew their customers and market intimately.
• They knew their conversion, churn, LTV, and other metrics by heart.
• They had the resources to handle the influx of new trials.

Castos was one of these companies.

Founder Craig Hewitt didn’t see a significant increase in his company’s growth rate after Castos dropped the credit card requirement for its free 14-day trial, but overall the move was positive for the company. It enabled more employees from large nonprofits and organizations to try the product without having to ask for the company credit card number and gave Castos’s sales team the ability to have prospects try the product more easily.

If your business has matured to a place where you know that if you had five or 10 times more trials you’d see increased growth, try dropping the credit card requirement for one to two months to see how it impacts the business.

But during that time, be obsessive about the numbers. Every metric you know by heart—trial-to-paid, churn, referral, etc.—is going to change once you pull the credit card requirement. Best case, you’ll know within a month or two if it’s working, but it can take several months because you also want to take into account changes in downstream churn. Craig said it took almost two months after Castos dropped the requirement for him to get a bead on the new numbers.

As I mentioned, your support requirement will also change when you add five to 10 times the number of new trials. You’ll have to keep a sharper eye out for spammers and be much more active to convert users who don’t provide a credit card up front because 90% of them wouldn’t have signed up otherwise.

Just remember the golden rule of experimenting: Only change one variable at a time.

If you’re going to remove the credit card requirement, don’t also increase the price. Don’t also introduce a free plan. Let the metrics stabilize so you can identify the patterns before you do the next thing.

You may want to consider a shorter trial length so you can see the results of your experiments even faster. A seven-day trial means you can run through four cohorts of trial users in the same amount of time as a 30-day trial—that’s four times as many tests.

Not every industry or app can have a seven-day trial, but the shorter you make your trial—including having no trial at all but just a refund policy during the first 30 days—the faster you can experiment.

You also want some positive time pressure to encourage users to start getting value from your product right away. If you offer a 30-day trial, how many users will wait until you send out that final “your trial is ending” email to actually start using their account?