To apply a customer's account balance to recurring fees, go into the customer's profile and click Personal Information. 

Click Edit Account Info in the top right and then scroll down to Account Administration. Next, check the box to "Use account balance" for Recurring Fees.
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This tells the system to apply account balance to membership fees, penalty fees, and add-on charges, before charging the credit card on file.

Customers can also make this change in their user profile. 

In the app, under Billing Information, they can select to have their account balance be applied to recurring fees first, before their credit card is charged.