Credits
KRED-its
A virtual currency customers buy upfront and spend as they use your product. The bridge between subscriptions and pure usage-based pricing.
Credits are a unit of consumption that customers prepurchase. Buy 10,000 credits for $1,000. Each API call costs 1 credit. Each premium feature costs 5 credits. When credits run out, buy more. Credits smooth out usage-based pricing by adding prepayment and predictability.
Credits work because they solve a problem for both sides. The vendor gets cash upfront and committed revenue. The customer gets a predictable budget they can allocate across their team. Nobody is surprised by the bill.
The design of your credit system matters enormously. If credits expire, customers feel pressured and may churn. If credits never expire, customers stockpile them and your recognized revenue gets complicated. Most companies expire credits annually, which matches budget cycles and creates healthy urgency to use what you paid for.
Examples
An AI platform sells credit packs.
Anthropic sells API credits. A customer buys $10,000 in credits. Claude API calls deduct from the balance based on tokens processed. The customer's finance team approved one purchase order instead of reviewing a variable monthly bill.
Credits with tiered pricing.
A data enrichment API sells credits: 1,000 credits for $100, 10,000 for $800, 100,000 for $6,000. Volume discounts incentivize larger purchases. The customer commits more upfront. The vendor captures more revenue with less billing overhead.
A company designs credit expiration.
A SaaS product sells annual credit packs that expire after 12 months. A customer buys 50,000 credits in January. By November, they have used 35,000. The sales rep calls: "You have 15,000 credits expiring. Want to discuss how to use them?" This creates a natural re-engagement opportunity.
In practice
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Frequently asked questions
Should credits expire?
Most companies expire credits annually. This matches enterprise budget cycles and creates urgency to use credits before they expire. Some companies roll over unused credits for one quarter as a goodwill gesture. Never expire credits within 30 days. That feels punitive.
How do you set the price of a credit?
Work backwards from your cost to serve. If an API call costs you $0.001 and you want 80% gross margin, price it at $0.005. Then set 1 credit equal to 1 API call for simplicity, or use round numbers (1 credit = $0.01) for easier math. The credit-to-action mapping should be intuitive, not a puzzle.
Related terms
A pricing structure where revenue scales directly with customer usage. Broader than usage-based pricing, it includes credits and commitments.
Charging customers based on how much they consume. Pay for what you use. The model behind Snowflake, Twilio, and AWS.
Charges that kick in when a customer exceeds their plan's included usage limits. The bill that surprises people.
Tracking and measuring customer usage in real time for billing purposes. The plumbing that makes usage-based pricing work.
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