Credit-based billing systems have hidden complexity around expiry, reset, and rollover. Should old credits be consumed before new ones? How do you prevent customers from hoarding? Founders often underestimate these design decisions.
I'm curious to get your take on like the difference between credits resetting and credits expiring.
Credits get into the ledger via some grant of credits, right? And so every grant has to have expiry behavior of some kind. And so that grant will expire at a certain point, or it could be reset manually at a certain point. Let's say like change of plan or a churn or like an upsell to a different plan where those credits are no longer relevant. You could think of it in terms of a reset, right? Like if you get X amount of credits per period, per month, for example, they're expiring, or you could think of it as usage that's resetting every month and being— new usage is being granted. You also want to consider rollover policies. So some amount of your credits might roll over optionally into the next month. This also ties into the question around expiries. So do you consume the rollover credits first? Or after the new credits, usually you would do it first.
Rollover's really interesting because like the way I've always thought about it is it's like, it's, it's kind of like a, a rule that's designed to prevent like anti-hoarding or something.
I think rollovers come up a lot less than you would expect in other worlds. Like back in the day when cell phone providers sold minutes, it was extremely common and like a common way to sell. I think that what it addresses is, I paid for X credits, I didn't get to use them all this month, like, I should still be able to use them. And when I've seen it implemented, it's almost always just last period's credits roll into this period's and then expire in this period's time period. If you let it get more complex than that, it becomes a mess accounting-wise. I think it addresses like, yeah, that just the, I do plan on using all that. Don't take them away from me even though I paid. In practice though, I think it's kind of rare. Um, it's a little bit harder to account for. It's a little bit harder to, uh, report to the user and, you know, track a more complex balance. So it just depends on the type of product you have, maybe the cost. Um, if you're like a $200 a month plan, you probably don't bother with rollovers, but if you're talking to, in a sales-led world, it's a large contract, maybe there's a little bit, it becomes like a negotiation lever and could be powerful in that way.
