---
title: "Credit-Based Pricing: Prepaid Credits, Top-Ups and Real-Time Balances"
url: https://getlago.com/blog/credit-based-pricing
description: "Learn how credit-based pricing works: prepaid and free credits, wallet balances, automatic top-ups, expiration, and the records Finance needs."
authors: ["Anh-Tho Chuong"]
tags: ["Pricing & Monetization", "Billing", "AI"]
published: 2026-10-10
reading_time_minutes: 13
---

# Credit-Based Pricing: Prepaid Credits, Top-Ups and Real-Time Balances

Credit-based pricing lets a customer buy or receive credits and spend them on measured product actions. A credit has a defined purchase value and a defined cost for each action. A wallet tracks grants, purchases, consumption and expiry. Billing converts the underlying usage into charges and applies available credits under the contract.

The appeal is simple: the customer has a budget and the vendor has a way to charge for variable work. The difficult part starts when the displayed balance, the unbilled usage and the invoice disagree. A good credit model makes those three views reconcilable.

This is a guide to credit-based billing, prepaid credits and credit drawdown for SaaS and AI products. The numbers below are hypothetical. They are a model to test, not Lago pricing.

**Five decisions before launch**
• Define what a credit buys and show an example in product units.
• Decide whether paid, included and promotional credits live in separate wallets and which is consumed first.
• Show both finalized and ongoing balances when usage is billed after the event.
• Specify the top-up trigger, payment timing and behavior when credits run out.
• Give Finance a ledger from purchase or grant through usage, invoice, expiry and refund.

**In this guide**

- [What is a credit-based pricing model?](#what-is-a-credit-based-pricing-model)
- [Which credits should a product offer?](#which-credits-should-a-product-offer)
- [Prepaid credits and the wallet ledger](#prepaid-credits-and-the-wallet-ledger)
- [Top-ups, refills and auto-recharge](#top-ups-refills-and-auto-recharge)
- [A worked credit-based pricing example](#a-worked-credit-based-pricing-example)
- [Benefits and failure modes of credit-based pricing](#benefits-and-failure-modes-of-credit-based-pricing)
- [How should AI products price credits?](#how-should-ai-products-price-credits)
- [Accounting, refunds and unused credits](#accounting-refunds-and-unused-credits)
- [How to implement credit-based billing](#how-to-implement-credit-based-billing)
- [How Lago handles credits and wallets](#how-lago-handles-credits-and-wallets)
- [Credit-based pricing FAQs](#credit-based-pricing-faqs)

### What is a credit-based pricing model?

A credit-based pricing model gives customers a balance they can spend across defined actions. The customer may purchase credits, receive them with a plan or get a promotional grant. Each action has a credit cost. Credit-based billing is the system that records the actions and applies the credits to charges.

Imagine 1 credit costs $0.10. A chat request uses 5 credits, so its displayed price is $0.50. An image uses 20 credits, or $2.00. The model works when the buyer can translate a pack of credits into likely work. If the credit cost changes by model, resolution or region, show that rule before the customer spends.

Pricing sets the conversion and action costs. Billing tracks the balance, applies the contract's consumption order, issues invoices and records adjustments. Credits are still a form of usage pricing: the credit is an intermediate unit between usage and money. See the [usage-based billing guide](https://getlago.com/blog/usage-based-billing) for the full event-to-invoice path.

#### Credits versus tokens, seats and entitlements

Tokens measure text processed by a model. Credits are a commercial unit you define. One request may use a different number of tokens each time but cost a fixed number of credits; alternatively, credits can vary with actual token consumption. A seat gives a person access. An entitlement says whether an account can use a feature or how much of it is included. None of these units replaces the others automatically.

| Model | When cash is collected | Buyer predictability | Main operating risk |
| --- | --- | --- | --- |
| Prepaid credits | Before paid credits are usable | Known purchase amount; uncertain burn rate | Stale balance or abrupt cutoff |
| Postpaid usage | After the measured period | Bill varies with use | Large unpaid balance |
| Flat subscription or seats | On a recurring schedule | Known fee within the plan | High-cost users outgrow the fee |
| Hybrid: fee plus credits | Recurring fee, with possible top-ups | Starting budget and expansion path | Unclear allowance and credit order |

### Which credits should a product offer?

Purchased, included and promotional credits can have different commercial terms. Treat them as distinct in the ledger, even if the customer sees a combined balance. The agreement should say whether they expire, roll over, can be refunded and which are consumed first.

| Credit type | How it enters the account | Question to settle |
| --- | --- | --- |
| Purchased credits | Checkout, invoice or contract | When do they become usable: order, invoice or confirmed payment? |
| Included credits | Recurring grant with a plan | Do unused units carry into the next period? |
| Promotional credits | Trial, referral or goodwill grant | What expires and what happens after the grant runs out? |
| Credit pack | One-time purchase of a block | Does the effective price per credit change with pack size? |
| Committed drawdown | Negotiated enterprise contract | How are usage, true-ups and overage handled? |

A billing credit or credit note is different from a usage credit. It adjusts an amount owed on an invoice. Avoid showing the two under one unexplained “credits” label. Free grants also should not be represented as collected cash.

#### Set the consumption order explicitly

Suppose an account has 2,000 promotional and 10,000 purchased credits. If promotional credits are used first, a 9,000-credit month consumes 2,000 free and 7,000 paid credits. If purchased credits are used first, it consumes 9,000 paid credits and leaves the free grant. Those choices change the remaining balances and the accounting evidence.

In Lago, wallet priority sets the order in which wallets apply to invoices; ties use expiration and creation order. To implement free-first versus paid-first deliberately, model the balances and scope in separate wallets and test the resulting invoice. Do not assume a mixed wallet automatically produces the desired policy. See the [wallet documentation](https://getlago.com/docs/guide/wallet-and-prepaid-credits/overview).

### Prepaid credits and the wallet ledger

A prepaid credit purchase is an advance payment for future service, subject to the contract and accounting treatment. It creates cash or a receivable and a future obligation, rather than making every dollar earned immediately. When the service is delivered, the ledger records usage and the relevant credits are applied. Finance uses that evidence to recognize revenue under its policy.

A wallet needs more than a number on screen. It needs entries for each paid purchase, free grant, charge, top-up, void, expiry and adjustment. Each entry should carry a timestamp, source, amount, currency or credit unit, and reference to the event or invoice it settles. This is what lets Support answer “where did my credits go?” without reverse-engineering a net balance.

For a customer with several products, wallets may be scoped by fee type or billable metric. A wallet in one currency should not silently pay an invoice in another. In Lago, wallet credits apply to subscription and progressive billing invoices in the wallet's currency, after tax and credit notes; they do not apply to one-off invoices. These are product-specific rules, so verify them when designing the checkout and customer-facing explanation. [Lago wallet docs](https://getlago.com/docs/guide/wallet-and-prepaid-credits/overview).

#### What does a real-time credit balance show?

A finalized wallet balance reflects credits left after invoices have been finalized. An ongoing balance estimates what remains after current, not-yet-finalized usage, taxes and draft invoices. If the finalized balance is 1,000 credits and unbilled work is estimated at 180 credits, the ongoing balance is about 820. The two figures can legitimately differ.

Lago documents the ongoing balance as a premium feature that refreshes about once a minute or when an invoice is finalized. It is useful for customer visibility and alerts. It is not a synchronous authorization check for every request. If a strict spending limit is part of the promise, the application or gateway must enforce the stop using a policy designed for the latency and race conditions of the workload. [Balance documentation](https://getlago.com/docs/guide/wallet-and-prepaid-credits/overview).

#### What happens when a wallet reaches zero?

Choose a policy before launch. The application can block new work, allow a defined grace or negative-balance amount, start postpaid overage, or require a successful top-up. The correct answer depends on whether interrupted work would harm the customer and whether the account is authorized to incur debt. An alert tells the application to act; the application or gateway performs the enforcement.

Show both the threshold and the consequence to customers. “You have 100 credits left” is less useful than “At zero, new image jobs pause until a top-up succeeds.” If top-up payment fails, purchased credits may not become available. Do not display pending credits as spendable.

### Top-ups, refills and auto-recharge

A manual top-up adds a customer-initiated purchase or grant. An automatic rule triggers at an interval or when the ongoing balance crosses a threshold. It can add a fixed amount or refill to a target balance. These are different promises: “add 500” always adds 500; “restore to 500” buys only the gap.

| Rule | Example | What to tell the customer |
| --- | --- | --- |
| Fixed threshold top-up | Below 200, add 500 credits | Each successful trigger purchases 500 |
| Target threshold top-up | Below 200, refill to 1,000 | Purchase amount varies with the balance |
| Interval top-up | Add 1,000 every month | Purchase happens on the schedule, regardless of burn |

Lago supports fixed and target rules, triggered by a threshold or an interval. Its threshold rule watches the ongoing balance. Purchased credits enter the wallet after payment succeeds; granted credits enter immediately. A top-up can issue its invoice at initiation or after successful payment, depending on configuration. Set minimum and maximum purchase amounts and test failed payments and repeated threshold crossings. [Top-up documentation](https://getlago.com/docs/guide/wallet-and-prepaid-credits/wallet-top-up-and-void).

#### Expiration and rollover

Credits that never expire give customers flexibility but can leave long-lived obligations. An expiry date gives a clear end to a grant or purchase but can create distrust when it is hidden or applied to paid credits unexpectedly. State the date at purchase or grant, remind customers before it arrives, and show what was voided.

Lago wallets roll over by default until the balance reaches zero. A configured wallet expiration voids remaining credits at that date. If the commercial contract promises partial rollover, different dates for paid and promotional credits, or special refund rights, model those requirements explicitly. Legal rules for prepaid value vary by jurisdiction; Finance and counsel should approve the policy before launch.

### A worked credit-based pricing example

Consider a hypothetical product that sells 10,000 paid credits for $1,000, so each paid credit represents $0.10. It grants 2,000 promotional credits. A chat request costs 5 credits and an image costs 20. The account places 1,200 chat requests and generates 150 images in month one.

| Action | Calculation | Credits |
| --- | --- | --- |
| Chat | 1,200 × 5 | 6,000 |
| Images | 150 × 20 | 3,000 |
| Total use | 6,000 + 3,000 | 9,000 |

With **free-first** consumption, the 9,000-credit charge uses all 2,000 promotional credits and 7,000 purchased credits. The account has 3,000 purchased credits left. Under the simplified assumption that each used paid credit corresponds to $0.10 of the delivered service, $700 of the prepaid amount is associated with delivered usage and $300 remains associated with future service. Finance must check performance obligations, allocation and breakage under the actual contract.

With **paid-first** consumption, 9,000 purchased credits are used. The account has 1,000 purchased and 2,000 promotional credits left. Under the same simplified assumption, $900 is associated with delivered usage and $100 of the purchase remains for future service. The customer received the same 9,000 credits of work, but the ledger and revenue timing differ.

The proposed top-up rule says: when the ongoing balance falls **below 2,000 credits**, buy 5,000 more for $500. Month one ends at 3,000 paid credits, so **no top-up occurs yet**. Another 1,500-credit job takes the ongoing balance to about 1,500 and triggers the purchase. The 5,000 purchased credits become available only after payment succeeds. This is the edge case a pricing page should explain.

### Benefits and failure modes of credit-based pricing

Credits can collect cash before usage, give a customer an explicit budget and create one spendable unit across several features. They also make small promotions and included plan allowances easy to express. These benefits depend on the buyer understanding what a credit buys. An opaque exchange rate can make even a predictable purchase feel unpredictable in use.

| Failure mode | What the customer sees | Control to design |
| --- | --- | --- |
| Unclear unit value | A pack size but no estimate of work | Show example tasks and credit costs before purchase |
| Stale displayed balance | Usage appears to continue after zero | Label finalized and ongoing balances; show refresh timing |
| Surprise cutoff | A job stops when credits expire or run out | Alerts, explicit depletion policy and a safe top-up path |
| Top-up failure | A purchase is pending but work cannot resume | Distinguish pending from usable credits; retry payment |
| Disputed expiry or refund | Customer cannot see which credits were lost | Purchase-level dates and traceable void and refund entries |
| Margin drift | Credit cost stays fixed while provider cost rises | Monitor cost by model and version the price policy |

For Product, the first test is comprehension: ask a prospective buyer how many common tasks a pack will fund. For Engineering, it is a race-condition test: fire concurrent requests as the ongoing balance approaches zero and verify the promised stop or grace behavior. For Finance, it is a reconciliation test: take one customer from opening wallet through usage, invoice, payment and closing liability. A clean average account does not test any of these boundaries.

### How should AI products price credits?

Credits can hide provider complexity from buyers, but they do not remove it for the seller. A product may convert input tokens, output tokens, cached tokens, model calls, GPU-seconds or completed tasks into credits. The public unit can be simple while the internal event retains the model and cost dimensions.

A request that uses an expensive reasoning model should not silently have the same credit cost as a cheap model unless the margin can absorb it. Model the credit burn for light, typical and heavy workloads. Recalculate when provider prices, model routing or task success rates change. Then decide whether to change the action's credit cost, the price per credit, the included grant or the model mix. Existing customer contracts may constrain changes.

A customer who cannot estimate how many tasks a pack buys may prefer direct currency pricing. Credits work best when they make a varied product easier to budget, not when they obscure the cost of each action. For the broader choices, see [AI pricing models](https://getlago.com/blog/ai-pricing-models).

### Accounting, refunds and unused credits

Cash collection, wallet balance and recognized revenue are separate measures. A purchase can produce an invoice and payment now while the service is delivered later. A free grant can create consumption without customer cash. An expiry can remove credits without a new service event. A refund reverses an obligation or settles a customer claim under the contract.

Finance should be able to reconcile opening paid and free balances, purchases and grants, usage drawdown, voids and expirations, refunds, and closing balances. It also needs the price version and the event or invoice behind each deduction. Do not infer recognized revenue from the current wallet balance alone. [IFRS 15](https://www.ifrs.org/issued-standards/list-of-standards/ifrs-15-revenue-from-contracts-with-customers/) describes the principles for contract liabilities and revenue as obligations are satisfied; ASC 606 applies in US GAAP. Breakage and refunds require contract-specific judgment.

Promotional credits are not cash receipts. Whether they affect transaction-price allocation, marketing expense or another accounting line depends on the arrangement. The same is true of unused paid credits and their expiry. Present a ledger and the policy to Finance rather than hard-coding a universal accounting answer into the product.

### How to implement credit-based billing

1. **Define the unit.** State the currency-to-credit conversion, the credit cost of each action and how changes affect existing purchases.
2. **Meter the actions.** Emit a stable event ID, customer or subscription ID, metric, quantity and usage time. Test duplicate and late events.
3. **Create the wallet policy.** Separate credit types where their rights differ. Configure scope, priority, expiration and currency.
4. **Set top-ups and depletion behavior.** Specify trigger, amount or target, payment timing, failed-payment behavior and whether service pauses.
5. **Expose the right balances.** Label finalized and ongoing balances. Give customers a usage and transaction history.
6. **Connect invoices and Finance.** Reconcile events, charges, wallet deductions, payments, adjustments and the accounting export.
7. **Replay real usage.** Test heavy users, burst traffic, a balance just above and below the threshold, refunds and expiry before launch.

### How Lago handles credits and wallets

Lago is the open-source, real-time monetization platform that turns product usage into customer-specific pricing, credits, entitlements, invoices and payments. Its wallets can hold purchased and granted credits, apply to selected billable metrics or fee types, and follow a defined priority. The [wallet guide](https://getlago.com/docs/guide/wallet-and-prepaid-credits/overview) documents creation, application scope, expiration and the distinction between finalized and ongoing balances.

A product can read wallet data through Lago's API. For example, a wallet creation request can set a customer, currency, credit value and separate paid and granted amounts. The values below are illustrative; use the [current API documentation](https://getlago.com/docs/guide/wallet-and-prepaid-credits/overview) for a live integration.

```json
{
  "wallet": {
    "external_customer_id": "customer_42",
    "name": "AI usage",
    "rate_amount": "0.10",
    "paid_credits": "10000",
    "granted_credits": "0",
    "currency": "USD"
  }
}
```

Lago supports recurring fixed or target top-ups on a schedule or balance threshold. The premium ongoing-balance feature estimates current consumption; the application remains responsible for a hard request-path stop. [Wallet traceability](https://getlago.com/docs/guide/wallet-and-prepaid-credits/traceability) shows which top-ups funded deductions. Check the current plan for premium capabilities before publication.

If you are designing a credit model, [talk to Lago's monetization team](https://getlago.com/book-a-demo) about the metric, wallet policy and invoice you need to support.

### Credit-based pricing FAQs

#### What is credit-based pricing?

It is a model in which customers buy or receive a balance and spend credits on defined product actions. The value of one credit and the cost of each action must be clear. The wallet and invoice should let customers see what they bought and what they used.

#### How do prepaid credits work?

A customer pays for credits before using the service. The billing system records the purchase, adds usable credits under the payment policy, and draws them down as usage is rated and billed. Cash receipt and revenue recognition may happen at different times.

#### What is the difference between credits and tokens?

A token is a technical unit of model input or output. A credit is a price unit chosen by the product. One action can use many tokens but have a fixed credit cost, or its credit cost can vary with token use.

#### What is a credit wallet in billing?

It is a ledger and policy for a customer's credits. It records purchases, grants, deductions, top-ups and voids, plus rules such as currency, scope, priority and expiration. The displayed balance is a view of those records, not a substitute for them.

#### How do automatic top-ups work?

A rule purchases or grants credits on a schedule or when a balance crosses a threshold. It may add a fixed amount or refill to a target. For paid top-ups, specify the payment method and when the new credits become spendable.

#### What is a real-time credit balance?

It is an estimate of spendable credits after accounting for current, not-yet-finalized usage. It can differ from the finalized balance used by completed invoices. Its update frequency matters: a near-real-time estimate is not the same as a synchronous authorization check.

#### Should prepaid credits expire?

That is a commercial and legal decision. Expiration may limit long-lived obligations, while unexpected expiry can damage trust. Explain the date and whether it applies to purchased, included or promotional credits. Have Finance and counsel review the treatment for each market.

#### How do rollover credits work?

Rollover carries unused credits into a later period. A policy can allow all, some or none to roll over, and can set a maximum duration. The wallet ledger should preserve the original grant or purchase so that expiry and consumption order remain auditable.

#### Are free or promotional credits recognized as revenue?

A free grant is not cash collected from the customer. Its financial treatment depends on the contract, the promotion and applicable accounting policy. Keep free and purchased balances distinguishable so Finance can evaluate the arrangement without guessing from a combined number.

#### What happens when a customer runs out of credits?

The product can pause new work, allow a contracted grace amount, initiate a paid top-up or move to postpaid overage. Choose the rule before launch and explain it to the buyer. A billing alert alone does not block a request.

#### Is credit-based pricing the same as usage-based pricing?

Credit pricing is one way to package usage pricing. The product still measures actions and assigns a cost; the customer spends credits rather than seeing each action as a direct currency charge. Credits can also be included in a subscription.

#### What is prepaid versus postpaid billing?

Prepaid billing collects money before the covered service is used, then draws down the balance. Postpaid billing measures use first and invoices afterward. Some contracts combine them: prepaid credits cover initial usage and postpaid overage starts when the balance is depleted.

#### How do you price a credit for an AI product?

Start with the work the buyer understands, then measure provider and other delivery costs for representative workloads. Choose the currency-to-credit rate and per-action credit cost so the resulting price works across cheap and expensive models. Recheck it when routing or provider prices change.

#### Can customers get refunds for unused credits?

That depends on the contract, the type of credit and applicable law. Purchased credits may carry different rights from free or included credits. The product should preserve purchase, usage and expiry records so Support and Finance can calculate any permitted refund accurately.

#### Related reading

- [Usage-based billing: the complete guide](https://getlago.com/blog/usage-based-billing)
- [Prepaid credits versus progressive billing](https://getlago.com/blog/prepaid-credits-vs-progressive-billing-for-usage-based-billing)
- [AI pricing models](https://getlago.com/blog/ai-pricing-models)
- [Lago wallet documentation](https://getlago.com/docs/guide/wallet-and-prepaid-credits/overview)