4.1 AWS Pricing Models
Key Takeaways
- AWS uses a pay-as-you-go pricing model — you pay only for the services you consume with no upfront commitments.
- Three fundamental pricing drivers: compute (per hour/second or per request), storage (per GB per month), and data transfer (outbound per GB, inbound is free).
- Data transfer INTO AWS is always free; data transfer OUT of AWS to the internet is charged per GB.
- Reserved Instances and Savings Plans provide up to 72% savings over On-Demand for predictable workloads.
- The AWS Free Tier offers three types: 12-month free (new accounts), always free, and short-term trials for specific services.
Quick Answer: AWS pricing rests on three drivers — compute (per hour/second/request), storage (per GB-month), and data transfer (outbound per GB; inbound is free). You cut costs with Reserved Instances and Savings Plans (up to 72% off) for steady workloads and Spot Instances (up to 90% off) for interruptible ones. The Free Tier has always-free, 12-month-free, and short-term-trial offerings.
The AWS Pricing Philosophy
AWS pricing follows three principles tested directly on the exam:
- Pay-as-you-go — pay only for what you use, when you use it, with no long-term contracts required.
- Pay less when you reserve — commit to 1- or 3-year usage for substantial discounts.
- Pay less as AWS grows — economies of scale lower AWS's costs, and those savings are passed to customers through frequent price reductions.
Three Fundamental Pricing Drivers
| Driver | How You Are Charged | Examples |
|---|---|---|
| Compute | Per hour, per second, or per request | EC2 (per second), Lambda (per request + duration) |
| Storage | Per GB stored per month | S3 (per GB), EBS (per GB provisioned) |
| Data Transfer | Per GB transferred out of AWS | Outbound to internet, cross-Region transfer |
Data Transfer Rules
| Transfer Type | Cost |
|---|---|
| Data IN to AWS (from internet) | Free |
| Data OUT to internet | Charged per GB |
| Between AZs (same Region) | Charged (small) |
| Between Regions | Charged per GB |
| Within the same AZ (private IP) | Free |
On the Exam: Data IN = FREE, Data OUT = CHARGED. This is one of the most repeated billing facts. Private-IP traffic within a single AZ is also free, which is why keeping chatty components in the same AZ saves money.
AWS Free Tier
The Free Tier has three distinct offering types — knowing which is which is a guaranteed exam point.
1. Always Free
Free indefinitely, regardless of account age:
| Service | Free Amount |
|---|---|
| AWS Lambda | 1M requests/month + 400,000 GB-seconds |
| Amazon DynamoDB | 25 GB storage + 25 WCU + 25 RCU |
| Amazon CloudWatch | 10 custom metrics, 10 alarms |
| Amazon SNS | 1M publishes |
| Amazon SQS | 1M requests |
| AWS CloudFormation | Free (pay only for resources created) |
| IAM | Always free |
2. 12-Month Free (New Accounts)
Free for 12 months from sign-up:
| Service | Free Amount |
|---|---|
| Amazon EC2 | 750 hours/month of t2.micro or t3.micro |
| Amazon S3 | 5 GB standard storage |
| Amazon RDS | 750 hours/month of db.t2.micro/db.t3.micro |
| Amazon CloudFront | 1 TB data transfer out |
| Amazon EBS | 30 GB of SSD storage |
3. Short-Term Trials
Service-specific trials of varying length (for example, Amazon SageMaker and Amazon Redshift offer multi-month trials, and several security services offer short free-trial windows).
On the Exam: Lambda and DynamoDB are the classic "Always Free" examples; EC2 t2/t3.micro is the classic "12-Month Free" example. "Always Free never expires" is a common true/false trap.
Pricing Models for EC2
| Model | Commitment | Savings | Best For |
|---|---|---|---|
| On-Demand | None | Baseline | Short-term, spiky, first-time workloads |
| Savings Plans | $/hour for 1 or 3 years | Up to 72% | Flexible commitment across families/Regions |
| Reserved Instances | Specific instance, 1 or 3 years | Up to 72% | Steady-state, predictable workloads |
| Spot Instances | None (can be reclaimed) | Up to 90% | Fault-tolerant, interruptible batch jobs |
| Dedicated Hosts | On-Demand or Reserved | Varies | Compliance, BYOL licensing |
Savings Plans vs. Reserved Instances
| Feature | Savings Plans | Reserved Instances |
|---|---|---|
| Commitment | $/hour of compute usage | Specific instance attributes |
| Flexibility | Across families, sizes, Regions, OS | Locked to a specific instance type |
| Types | Compute SP (most flexible), EC2 Instance SP | Standard RI, Convertible RI |
| Discount | Up to 72% | Up to 72% |
On the Exam: Both give up to 72%, but Savings Plans are more flexible. If a scenario stresses flexibility across instance families or Regions, choose Savings Plans. Spot wins only when interruptions are tolerable.
S3 Pricing Factors
| Factor | How It Affects Cost |
|---|---|
| Storage Class | Standard > IA > Glacier > Deep Archive (cost falls) |
| Amount Stored | Per GB per month |
| Requests | PUT, GET, LIST (per 1,000 requests) |
| Data Transfer | Outbound charged; inbound free |
| Lifecycle Transitions | Small per-object cost to move between classes |
| Retrieval | Glacier retrieval priced by speed (Expedited > Standard > Bulk) |
Putting these together, the cheapest design stores rarely accessed data in a Glacier tier, keeps chatty traffic inside one AZ, and uses Savings Plans for any steady compute. The exam rewards spotting which of these levers applies to a given "most cost-effective" scenario.
A final framing that helps on exam day: ask whether the workload is predictable or interruptible. Predictable, always-on workloads justify a 1- or 3-year Savings Plan or Reserved Instance commitment. Interruptible, fault-tolerant workloads belong on Spot. New or unpredictable workloads start on On-Demand until a usage pattern emerges, at which point Cost Explorer's recommendations point to the right commitment. There is no penalty for combining models — a steady baseline on Savings Plans with spiky overflow on On-Demand or Spot is a common, exam-endorsed cost-optimization pattern.
Which of the following data transfer types is FREE on AWS?
A company wants to reduce their EC2 costs by up to 90% for a batch processing workload that can tolerate interruptions. Which pricing model should they use?
Which AWS Free Tier type provides 1 million Lambda requests per month indefinitely, even after your first 12 months?
What is the primary advantage of AWS Savings Plans over Reserved Instances?