Pricing strategy
Credit-Based Pricing: How Prepaid Credits Work and When to Use Them
By the Orvlin team · · 8 min read
How credits work
A customer buys credits up front. Each billable action consumes a defined number of credits. When the balance runs low, the customer tops up manually or through auto-reload.
Design decisions you must make
- Burn rate per action or model.
- Whether unused credits roll over or expire.
- Low-balance notifications and thresholds.
- Overage behavior when credits hit zero.
- Discounts for larger prepaid bundles.
Revenue recognition for credits
Prepaid credits are deferred revenue. Revenue is recognized as credits are consumed, and expired credits are recognized at expiration. Your billing system should produce this schedule automatically.
When credits are the right choice
Credits fit products with many billable actions of different cost, and buyers who need a fixed budget.
Frequently asked questions
- Are prepaid credits recognized as revenue immediately?
- No. They are deferred and recognized as they are used or expire.