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What is pro rata, and how does it work?

Pro-rata  - I'm sure you have all heard the term thrown around before, "Don't worry, that's just pro-rata charges" but what does it actually mean, and how does it effect a customer's bill?

 

Explanation:

 

In a Telstra sense, pro-rata is charging for a portion of a product/service and allocating a portion of the usage over a particular time.

 

Partial Month Charge.png

Typically if you are a brand new Telstra customer, your billing cycle (The time frame Telstra use to charge you for a particular product/service) will end 14 days after you sign up for your service.

 

Example:

 

You join up to Telstra on the 01/06/2011 on a $49 Freedom Connect plan, but your first bill is more than what you were expecting. Let me show you why this would be the case:

 

Charges on your bill:

 

$22.86 - $49 Freedom Connect Plan 01/06/2011 - 14/06/2011 ($49 (Cap plan charge) / 30 (days in a billing cycle) * 14 (number of days passed in the billing cycle))

$49.00 - $49 Freedom Connect Plan 15/06/2011 - 14/07/2011 (Everything in Telstra is charged a month in advance that is what this charge is for)

 

Now, as you have been charged for a portion of the service charge (14 days worth of access between the 01/06-14/06) you only receive a portion of your included usage totalling $210 ($450 (Inc usage) / 30 (days in a billing cycle) * 14 (number of days passed in the billing cycle)).

 

This is were a lot of people get stuck - some customers might use $400 of calls in 10 days, and not use it for the rest of the month, but if its a new service, you only receive a portion (or pro rata allocation) of your included calls, and in this example would result in excess call charges of $400 - $210 = $190, bringing the first bill from and expected $49 to a whopping $261.86.

 

When you make a plan change, or add a data pack part way through your billing cycle, the basics of what is described above remain the same:

 

 

You are charged from the date of the change, to the end of the current billing cycle for the new plan. Because you need to get back to being a month in advance on the new plan, the first bill will also charge you for a full month (for the following billing cycle). As you didn't use the remainder of the last billing cycle of the old plan, the amount you were in advance is credited back to you.

 

When you transfer a service out of your name into someone else's, or disconnect a service, a final account is generated, which will also result in pro-rata charging.

 

Disconnection:

 

Disconnections rarely take place on the last day of your billing cycle, so you will be charged for the period of time from the beginning of your last billing cycle to the date of disconnection, and receive a credit back for the unused portion of the month.

 

Transfer of Ownership:

 

For the outgoing customer, the pro-rata effects are the same as performing a Disconnection, as that is what they are effectively doing.

 

For the incoming (new customer), the scenario outlined above for the connection of a new service applies. Charged from the date of connection to the end of the cycle, plus a full cycle in advance.

 

 

 

Version history
Revision #:
2 of 2
Last update:
November 2017
Updated by:
 

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