Prepaid billing is a model where customers pay before they consume, buying a balance or a pack of credits in advance and drawing it down as they use the product. It is the opposite of postpaid billing, where usage is metered first and invoiced later.
How prepaid billing works
The customer adds funds — either a monetary balance or a set of credits — before any usage happens. Each action then deducts from that balance at a defined rate. When the balance runs low, the customer tops it up again, or the product auto-recharges it from a saved payment method.
Because the money is collected up front, there is no risk of unpaid invoices or chargebacks after the fact. The product only ever spends what the customer has already funded.
Difference from postpaid and subscriptions
Metered billing is postpaid: the customer uses the product, and the overage is invoiced at the end of the period. Prepaid flips that order — the money arrives first, and usage draws it down.
A subscription charges a fixed recurring fee for access. Prepaid is not tied to a period at all; a balance can last a week or a year depending on how fast the customer consumes it.
Real-world examples
Prepaid billing is everywhere consumption is variable and the provider wants payment guaranteed. Cloud platforms let you preload account credit. AI products sell token balances you draw down per request. Communication APIs sell message or minute bundles. Telecom prepaid plans are the classic consumer example.
The shared benefit is cash collected before delivery and zero collection risk — the customer cannot run up a debt they never pay.
When to use prepaid billing
Prepaid billing fits products serving customers you cannot easily invoice or chase — self-serve signups, international customers, or high-volume APIs where postpaid debt would be risky. It also gives customers a hard spending cap by design, which many teams prefer over an open-ended bill.
It is less suitable when customers expect to be invoiced in arrears, or when forcing an upfront payment adds friction that hurts conversion. In those cases a postpaid metered plan lowers the barrier to start.
How Commet handles prepaid billing
Commet supports prepaid billing through two consumption models: credits, where customers buy packs of units, and balance, where they preload a dollar-denominated account that each action deducts from.
Both draw down in real time as usage is tracked, and customers can top up from the customer portal without involving your team.
See the consumption models docs to pick between credits and balance.