Key Takeaways

• A credit is a unit of account, not money. The conversion rate, say 1 credit per 1,000 tokens, fixes its value, and changing it reprices every unsold balance.

• Cash from a credit sale lands as a contract liability, not revenue, and unredeemed balances become breakage revenue only under the conditions ASC 606 sets for unexercised rights.

• The balance has to resolve at request time, because a wallet that settles at invoice close can't stop a customer at zero from consuming.

• Six policy fields decide most credit disputes: conversion rate, grant expiry, deduction order, rollover, behavior at zero, and refundability.

How do prepaid credits work?

Prepaid credits work as a purchase followed by a running deduction. Money converts into a balance at a published rate, usage converts back into deductions at that rate, and the wallet decrements until it empties or expires.

The lifecycle of one credit grant:

1. The customer buys a package, or you issue credits for a trial or promotion.

2. The wallet records the grant with its own expiry date and feature restrictions.

3. Usage events get metered, then rated into credits.

4. Credit burn-down deducts that quantity from the eligible grant, in deduction order.

5. At zero, the plan blocks usage, charges the payment method, or auto top-ups.

6. At period close, credit rollover decides what carries forward.

Flexprice on building versus buying prepaid credit wallets covers where in-house builds break.

What should a prepaid credit policy define?

A prepaid credit policy has to answer what a credit buys, when it dies, and what happens at zero, in writing, before the first customer buys one. Every field left unwritten turns into a refund argument.

Flexprice is enterprise-grade, open source usage based billing infrastructure for AI and SaaS companies. It can be deployed in your own VPC, on-prem, or on Flexprice's managed cloud. Credits and Wallets treats every field above as configuration: per-grant expiry, deduction priority across stacked credit types, rollover rules, and auto top-ups. "We needed credits tied to plans at the platform level. Nothing else really handled it. Flexprice did." - Prajwal Prakash, CTO and Co-founder.

The wallet and credit grant APIs are in the Flexprice docs.

Related terms

Prepaid credits sit between the money a customer commits and the usage that consumes it.

• Credit-based pricing is the pricing model prepaid credits belong to.

• Credit burn-down is the deduction process that moves the balance.

• Credit rollover governs what survives the end of a period.

• Spending cap is the control for customers who aren't on a prepaid balance.

• AI credits applies the unit to token and model consumption.

FAQ

Are prepaid credits the same as a wallet balance?

No. Credits are the unit, and the wallet balance is the running total of the grants a customer holds. One wallet often carries several grants with different expiry dates and restrictions, so two identical balances can be worth different amounts.

Do prepaid credits count as revenue when the customer buys them?

No. The cash sits as a contract liability and converts to revenue as the customer consumes, because you still owe the service. Unredeemed balances become breakage revenue only under the conditions the revenue standard sets, and escheat law can keep them on the books.

Should prepaid credits expire?

Expiry is a policy choice with a tradeoff. Dated grants cap the liability and push consumption, while open-ended balances read as fairer and win enterprise deals. Most teams split it: promotional grants expire fast, purchased credits run twelve months or longer.

What's the difference between prepaid credits and pay-as-you-go?

Timing and commitment. Pay-as-you-go pricing bills after consumption with nothing committed upfront, while prepaid credits collect the cash first and meter against it.