How it works
Breakage comes from customers who stop using a product with a balance left, from credits that expire, and from leftovers too small to be useful. It is measured as unused credits divided by credits sold, for a group of purchases old enough that remaining usage is unlikely.
Breakage improves margins on paper, but it is money from customers who did not use what they paid for. When and how expected breakage may be counted as revenue is governed by revenue standards such as IFRS 15, so ask an accountant how it applies to you.
Example
In January a product sold 2,000,000 credits. By December, 1,700,000 have been used and usage from that cohort has flattened. Breakage is 300,000 ÷ 2,000,000 = 15%. At $0.01 per credit, that is $3,000 collected for service that was never delivered.
Credit breakage in Cred
cred.diy keeps a full ledger of credits issued and deducted per user and credit type, so you can measure breakage by purchase cohort from your own data. Balances do not lapse on their own, so any expiry policy is one your app applies deliberately.
Managing Credits docsQuestions
- Is high breakage good?
- It raises short-term margin, but it means customers bought more than they needed or stopped finding value, and those customers have less reason to buy again. Repeat purchases are usually the healthier goal.
- Does breakage require credits to expire?
- No. Credits that never expire still produce breakage when customers simply stop using them. Expiry increases breakage.
- How do I reduce breakage?
- Show remaining balances prominently, remind inactive customers what they can do with their credits, and sell smaller packs so customers are not pushed into buying more than they will use.
