Prorated

What does prorated mean?

Prorated means adjusting a cost or amount based on a specific portion of time or usage. Instead of paying (or receiving) the full amount, you only pay for what you actually use. This often applies to rent, salaries, service fees, and refunds. If you’ve ever moved into an apartment mid-month or canceled a subscription early, you’ve likely encountered a prorated charge or refund. Businesses use proration to ensure fair billing so customers aren’t overpaying or underpaying when services don’t align with the billing cycle.

How to find a prorated amount (equation & calculation)

To calculate a prorated amount, use this simple formula:

Prorated Amount = (Total Cost / Total Time Period ) × Time Used

Steps to calculate:

1. Get the total cost – This could be rent, salary, or a service fee.
2. Get the total time period – Usually measured in days or months.
3. Calculate the cost per unit of time – Divide the total cost by the total time period to figure out the cost for each unit of time.
4. Multiply by the time used – The portion of the period you’re responsible for.

Calculating a prorated amount is a straightforward way to ensure you’re only paying (or being charged) for the time you’ve actually used a service or product. Understanding how to calculate proration helps ensure you’re charged fairly.

Prorated example (using rent)

You’re moving into an apartment on September 10th, but rent is due on the 1st. Your monthly rent is $2,800, and September has 30 days.
Using the prorated formula:

Total cost = $2,800
Total time = 30 days
Time used = 21 days (Sept 10–30)

($2,800/30 )×21=$1,050

You’re only living there for 21 days in September, so you should only pay $1,960 instead of the full $2,800. Unless otherwise stated in the lease, you should only pay for the days that you actually occupy the unit. Paying for a space or product you do not have access to or are not using is unfair.

What is a prorated refund?

A prorated refund is when you get back the unused portion of a service. This is common when canceling subscriptions, memberships, or insurance policies before the next billing cycle.

Imagine you signed up for a meal kit delivery service for $200 a month, but halfway through the month, you decide it’s just not for you. You cancel the service. Instead of losing the full $200, the company gives you a prorated refund of $100 for the part of the month you didn’t use. After receiving your refund, you go straight to your computer and delete the bad review you left about how they overcharged you for the meals you didn’t even get to have.

Just keep in mind that not all companies do this automatically, and some might have specific rules about when they offer prorated refunds, so it’s always good to double-check.