Metered billing is a form of usage-based billing in which a customer's consumption is measured continuously, as a utility meter measures electricity, and the charge is worked out at the end of the period from the recorded total. The two terms are often used interchangeably. Where a distinction is drawn, usage-based billing is the pricing model as a whole, and metered billing refers to the mechanics of recording usage and charging in arrears.
The model is standard for cloud computing, telecommunications, payment processing and software sold through an API, where the unit may be a gigabyte stored, a minute of calling, a transaction processed or a request made. The billing system collects usage events during the billing cycle, removes duplicates, applies the price list, including any free allowance or volume tiers, and issues an invoice for the result.
Metered billing differs from flat-rate subscription billing, where the amount is fixed and charged in advance, and from prepaid pay-as-you-go arrangements, where the customer buys credit first. Many companies combine a fixed base fee with a metered charge for use above an included amount. Because the charge varies each period, card renewals for metered plans are processed as variable-amount recurring billing.