A 2024 survey found that adults in the US spend an average of $91 on subscriptions every month. And if you subscribe to any services with usage limits, you’ve likely encountered overage charges. A subscription overage is the additional fee a customer pays for using more than their plan includes. It’s a common practice across industries, from software and cloud services to telecom and financial services​. While customers are being charged for what they actually used, they still might be frustrated by overages, especially if they’re handled poorly.

Below, we’ll break down what subscription overages mean with real-world examples, why businesses implement overage fees, and best practices to make overage charges as fair and as problem-free as possible.

What’s in this article?

• What is a subscription overage?
  
• How some customers might react to overages
  
• How can businesses manage subscription overages?
  

What is a subscription overage?

Subscription plans generally allow customers a certain amount of access, and if they go beyond that limit, they’re charged a fee for the extra usage. These fees are used among companies that offer services such as software-as-a-service (SaaS) and cloud computing, and anywhere a business’s subscription product involves built-in usage limits. Here are some examples of subscription overages:

• A project management tool includes up to 50 active projects in its midtier plan. A customer on that plan creates 60 projects. Those extra 10 projects are billed at an overage rate.

• A cloud database allows up to 100,000 queries per month. A customer runs 120,000, so the extra 20,000 queries are charged as overages.

• A phone plan includes up to 5GB of data. The customer uses 6GB. The extra 1GB is billed at an overage rate.

Overage pricing makes subscriptions more flexible. Instead of prompting customers to upgrade immediately as they outgrow their plan, they simply pay for what they use. This accommodates growth without cutting people off midstream. However, if overage fees aren’t communicated well, or if they’re excessive, customers can view them as an unpleasant surprise.

How some customers might react to overages

Customers can respond to overage fees with a range of emotions. They might often feel surprised, concerned, or angry, and some might struggle with the challenge of budgeting for more than their usual subscription rate. The ways customers react to overage fees might include:

• Bill shock: A customer who didn’t realize they were over their limit until a large, unexpected charge shows up is likely to feel bewildered and dismayed. Beyond the shock, customers can get frustrated when they don’t understand how the overage was calculated, or if they feel they weren’t clearly warned. If a user doesn’t recall agreeing to the terms (or didn’t read the fine print), they might feel cheated.

• Sense of unfairness: Customers might perceive overage fees as a punishment for using the product too much, especially if the fee is high relative to the base cost. Even just the term “overage charge” can carry a negative connotation, as if the customer did something wrong and is being fined​.

• Budgeting concerns: For business customers, unpredictable costs can be a significant issue for forecasting and budgeting expenses. Enterprises often have strict budgets, and an overage fee that varies significantly month to month makes it difficult to manage this budget. If these fees make spending too erratic, business customers might scale back their usage or push for a different pricing model to control their costs.

How can businesses manage subscription overages?

If your business decides to implement subscription overage charges, adhering to best practices can make all the difference. Here are some strategies to manage overage fees in a way that can help keep customers content and revenue flowing:

• Be transparent from the start: Make sure your customers know from Day 1 that their plan has usage limits and exactly what it costs if users exceed them. Clearly outline the terms of service—including any overage fees—in contracts and on pricing pages​. Periodically remind customers of these terms in a friendly way (for instance, a polite note in their monthly reports).

• Keep fees reasonable: Set your overage pricing at a level that reflects the value the customer receives. If possible, keep the overage unit price in a similar range as the regular price per unit of the plan.

• Provide proactive usage alerts: Alert your customers as they approach their limits. For example, you might send an email or in-app notification when they’ve hit 80% of their usage limit and again at 100%. This gives customers a chance to make an informed choice to slow their usage, accept the fees, or upgrade. Offer usage tracking tools (such as a dashboard that shows how much of the allotment has been used) to empower customers and be transparent.

• Offer flexible upgrades: If a customer is consistently hitting the ceiling of their plan, make it easy for them to move to a higher tier that better fits their needs. Make the process of upgrading self-service and instant, and consider allowing midcycle upgrades with proration. Some companies also offer an auto-upgrade toggle or make automatic upgrade suggestions (e.g., a message saying, “You’re paying $300 in overages. Our higher plan is $250 extra and would eliminate those fees—would you like to switch?”)

• Consider rollover or grace periods: With rollover, customers can carry over any unused units into the next billing cycle. This can help customers feel like they’re getting the full value of their subscription. With grace periods, you can waive the overage fee the first time a customer goes over. A grace period can turn an otherwise negative experience into a pleasant one, and it reinforces your reputation as a fair partner.

• Make high-usage clients feel valued: Some companies do “overage discounts” for high usage, similar to high-volume discounts. If customers significantly go over their usage limit, overage fees per unit decrease, which can lessen the feeling of being penalized for being a big client and can encourage heavy use.

• Implement overage caps: Consider capping overage charges within a period to prevent runaway bills. For example, you might cap overages at 2x the base plan cost and then require an upgrade beyond that. A cap ensures no single customer accidentally generates a massive bill they can’t pay, and it acts as a safety net for the customer and your business relationship. You can also offer an opt-in cap (e.g., “never allow my bill to go over $X without my approval”) to make users feel more in control.

• Connect charges to value: Structure your plans so that extra usage translates to added value. For instance, if an ecommerce business goes over its plan’s order limit because it had a record-setting sales month, you can tie the overage fee to a win for the business. Similarly, if a marketing team sends 2,000 extra emails and the campaign is successful, you can communicate that the additional fee is part of that success.

• Monitor overages and assist: Make sure to notify your customer success or sales team when a major customer starts racking up substantial overage fees, so they can reach out personally. The usage might be a mistake (such as an integration error spamming your application programming interface, or API), or it might be an opportunity to upsell a bigger contract. Online billing platforms can send internal alerts to these teams or trigger automated workflows—for example, by creating a task in your customer relationship management (CRM) system when an account exceeds 110% of its allotment.