There are advantages and disadvantages to both so it really depends on the specifics of your product and it will likely require you to do some testing to see what works best.
There’s little doubt that asking for a credit card before granting access to a trial causes inconvenience and anxiety for users. Consequently, this can result in significantly fewer people signing up for your trial. So, why ask for a credit card upfront?
Research by SaaS customer engagement platform firm Totango indicates that companies who require a credit card at sign-up experience relatively high trial-to-paid conversion rates, with a reported average of 50%. This is because the main friction point, putting in payment information, has already been overcome, making it effortless for the user to convert into a paid subscriber.
Additionally, Softletter research reports that asking for payment details upfront is an effective way to ensure leads entering the sales funnel are more qualified. If people are willing to put in their payment information, they are likely more serious about your product and will be more likely to become customers.
There’s no question that people like to try before they buy to see if a service will actually work for them. Offering a free trial without requiring payment information is an excellent way to entice users to try your product with little risk of them feeling too anxious to sign up.
However, while asking for credit card info can lead to higher trial signup rates, Totango’s research also shows that trial-to-paid user conversions are much lower as many simply let their trial expire unless they are very motivated.
The decision of when to ask for credit card information so you can convert the most users overall can greatly depend on the level of trust prospective users already have in your company. Well-known companies usually have a much easier time getting large numbers to sign up for a trial even if they are asked for payment information upfront. Conversely, little known companies or new products already have an uphill battle to get trial users so adding a requirement for credit card information upfront will likely depress signups further. While newer companies may not want to ask for credit cards right away, even some well-known companies choose to capture payment information later with Google Apps for Work being a good example.
According to observations by Totango, trials requiring a credit card tend to have an average retention rate of 60% vs. 80% for trials not requiring a credit card after 90 days. This contributed to an end-to-end conversion rate for trials not requiring a credit card that was 100% higher (1.2% versus 0.6%). Even if you experience high trial to paid conversion rates with a trial requiring a credit card, you will still likely end up with fewer new customers overall off the same amount of traffic to your site. Conversely, SaaS companies who offer no credit card trials experience higher retention over time because they tend to prioritize engagement with their leads to get them to stick around.
With trials, the right time to ask for credit card information really depends on your product. Most will have the best results by waiting to ask for this information when the trial expires. However, if your company has no problem getting lots of people signed up for your trial, getting credit card information upfront will significantly improve your conversion rate and quickly grow your user base and recurring revenues.