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Objective 4.1Billing & Pricing· 2 min read

AWS Pricing Models

Compare and contrast the various pricing models for AWS

What you will learn

  • Distinguish On-Demand from upfront commitment (Reserved/Savings Plans) in terms of risk and discount.
  • Explain why Spot Instances suit certain workloads and not others.
  • Identify each Free Tier offer's type — always-free, 12-month limited, or a short trial.
  • Choose the cheapest pricing model for a given workload scenario.

There is no single "AWS price" — the same instance can cost very different amounts depending on the pricing model you choose. The general rule: the more you commit upfront, in volume or duration, the bigger the discount. And the more risk you accept (like resources being reclaimed suddenly), the lower the price goes.

The core models

On-DemandYou pay by the hour or second with no upfront commitment — the most expensive per unit, and the most flexible.
Reserved InstancesA one- or three-year commitment for a significant discount versus On-Demand, tied to a specific instance type and region.
Savings PlansA commitment to a fixed hourly spend amount for one or three years, with more flexibility than Reserved in which service is used.
Spot InstancesSpare compute capacity at a very steep discount, but AWS may reclaim it with very short notice (about two minutes).

Commitment vs. flexibility

On-DemandReserved Instances / Savings Plans
Upfront commitmentNoneOne or three years
Relative discountNo discount — the base rateLarge, potentially a substantial percentage off the On-Demand rate
Best suited forUnpredictable or short-lived workloadsSteady, predictable long-term workloads

When Spot Instances fit

A team runs nightly batch image processing, and the job can pause and resume from a checkpoint without losing significant progress. This is an ideal Spot scenario: the cost is far lower than On-Demand, and a sudden reclaim doesn't hurt because the job tolerates it and resumes later.

What matters on the exam

  • "Steady, predictable load for three years" points to Reserved/Savings Plans; "can pause and resume" points to Spot.
  • The Free Tier has three types: always-free within a monthly limit, 12-month limited, and short-term trials — exceeding the limit is billed at the normal rate immediately.

The sudden reclaim is real

A Spot Instance is not "a regular instance that's just cheap" — AWS may reclaim it with very short notice (about two minutes) if it needs the capacity for an On-Demand or Reserved customer. Using it for a workload that can't tolerate interruption (like a live production database) is a real design mistake, not just a theoretical risk.

Quick check

Answer in your head first, then reveal.

  1. Which pricing model requires no upfront commitment at all?Reveal the answer

    On-Demand.

  2. Why doesn't a Spot Instance suit a live production database?Reveal the answer

    Because AWS may reclaim it with very short notice, and a live database can't tolerate that interruption.

  3. What is the flexibility difference between Reserved Instances and Savings Plans?Reveal the answer

    Savings Plans are more flexible about which service is used, within the same committed spend.

  4. What happens when the Free Tier's monthly limit is exceeded?Reveal the answer

    The excess usage is billed at the normal rate immediately.

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Sources

Used to verify the facts. The writing is original to Passuit.