# Usage-based Billing

> Usage-based billing is a pricing model where customers are charged based on their actual consumption of a product or service, such as API calls, storage, or compute time.

- **URL**: https://dodopayments.com/glossary/usage-based-billing

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## What is Usage-Based Billing?

Usage-Based Billing is a type of pricing model where customers are charged based on their actual usage of a product or service. Instead of paying a fixed fee, the cost adjusts depending on the resources consumed, such as data, storage, or API calls.

This model is common in SaaS companies, cloud services, and utilities.

### How It Differs from Subscription and Recurring Billing

- In Subscription based billing customers pay a fixed, recurring fee over a set period.

- In Recurring based billing businesses regularly charge customers at intervals but may include variable costs.

- In Usage-based billing businesses charge depending solely on the amount used.

### Why It's Important

It encourages scalability by aligning costs with customer usage, Attracts startups and businesses seeking flexibility and provides clear cost-value alignment, fostering customer satisfaction and retention.