# Copilot Credits spending policies: how to cap, alert on and monitor pay-as-you-go Copilot usage

> How to set Copilot Credits spending policies in the Microsoft 365 admin center: limits by user, group and tenant, alerts, requests, billing and reports.

Canonical: https://o365hq.com/blog/copilot-credits-spending-policies-cap-alert-and-monitor-pay-as-you-go-copilot
Provider: IT Partner LLC — US Microsoft partner since 2006. Book: https://o365hq.com/book

Published: 2026-11-11 · IT Partner

A spending policy in the Microsoft 365 admin center, under Copilot > Cost Management, is the control that keeps usage-billed Copilot features from surprising you. It names who may use them, which services, how many Copilot Credits the policy and each user may consume in a month, who is alerted, and which billing method pays. Give every policy a monthly limit and a per-user limit, name the alert recipients, and read two tabs: Overview, refreshed every 4 hours, and Consumption, refreshed every 2 hours, per Microsoft Learn as of November 2026.

## What a spending policy is, and what it is not

Usage-based billing charges some Copilot experiences, such as Copilot Cowork and the Work IQ API, in Copilot Credits beside the seat license. Microsoft's FAQ of 6 November 2026 defines the control: a spending policy "determines who can use usage-based Copilot services, what services they can access, how much they can spend, and which billing method pays for that usage". It stays in place until an admin changes or deletes it, and it does not renew or expire.

What it is not:

- **Not a credit or an entitlement.** Microsoft Learn (30 October 2026) calls policies "limit-based controls" that "don't reserve or allocate Copilot Credits to users or groups".
- **Not only a budget.** Learn's Cowork admin page says a policy is also the access control and that "a low credit limit doesn't block access". To remove access, take the user out of every policy that selects the service.
- **Not the classic pay-as-you-go billing policy** for agents in Copilot Chat and SharePoint, whose budget alerts without stopping usage. Our [Copilot licensing and pricing guide](/blog/microsoft-365-copilot-licensing-and-pricing-2026) covers that control.

The policy matters more from early 2027. Microsoft's FAQ says that, starting in its fiscal third quarter of 2027 (January to March 2027, final date not announced), a new purchase of Microsoft 365 Copilot Business through a CSP partner enables usage-based billing on the tenant by default, sets up an Azure subscription and applies a default cap of 4,000 Copilot Credits per user per month. What that default changes, who is excluded and what to decide before the next purchase is in [Copilot Business and usage-based billing by default](/blog/copilot-business-usage-based-billing-on-by-default-2027).

## The policy wizard, step by step

Usage-based billing is first switched on under Copilot > Cost Management with **Get Started**, which opens a panel titled "Activate the default spending policy for your organization". After that, policies are added on the **Configuration** tab with **+ Add spending policy**. Microsoft Learn (30 October 2026) says you can create any number.

| Step | What it decides |
|---|---|
| Scope | The policy name, and **All users** or **Specific groups**. Individual users can be targeted only through a security group. |
| Agents and services | Which services may consume credits under this policy. Microsoft's FAQ lists Microsoft 365 Copilot (Copilot Cowork, Work IQ API), Security Copilot, Microsoft Copilot Studio and GitHub Copilot. **Auto-apply new services** (in the FAQ, "Allow new agents and services as they become available") is on by default and adds future services to the policy. |
| Limits and alerts | The monthly policy limit, an optional per-user limit, the alert thresholds and the recipients. |
| Model choice | Shown only when Cowork is selected: automatic model selection, or a model template of at least two models. |
| Billing method | Defaults to the default policy's method. A Global or Billing administrator can override it per policy, which allows departmental billing. |
| Delegated access | Listed in Microsoft's FAQ of 6 November 2026. Learn's page does not describe the step: Microsoft has not documented what it decides. |
| Review | **Create spending policy**. The policy applies to scoped users immediately. |

The order of the steps differs between Microsoft's documents, so follow what your tenant shows. The services on offer also change: Learn keeps the list on its usage-based billing overview page (30 October 2026).

## Limits at user, group and tenant level, and how they combine

Learn says the system supports user, group and tenant policies. In practice that gives three numbers:

- **Tenant level.** The default policy covers all users, and its limit is set when you activate it. Every additional policy "has its own independent limit and doesn't inherit the tenant-level limit", so the tenant's monthly ceiling is the sum of all policy limits.
- **Group level.** A policy scoped to security groups has a monthly limit shared by everyone in scope. At the limit, users "lose access to agents and services for the rest of the month until credits reset on the first of the month". The API reference (27 October 2026) defines the period as a UTC calendar month.
- **User level.** An optional per-user limit stops one person from spending the whole pool. Where it is set, Learn asks for at least 2,000 credits per user per month.

Policies do not stack. If a user is covered by more than one policy for the same service, the system picks one: the highest per-user limit, then the largest policy limit, then the newest policy. The chosen policy "applies in full and settings from other policies aren't combined", so a stricter policy added beside a looser one changes nothing for users covered by both. Moving a user between groups mid-month does not reset the count: Learn says consumption carries forward.

## Alerts, the limit and requests for more

**Admin alerts.** Each policy takes a usage threshold and a list of email recipients. Microsoft's setup text says the emails start at the threshold and repeat daily until the month resets or the policy is adjusted. The API overview (3 November 2026) calls them "notify-only": an alert stops nothing.

**User alerts.** If the policy has a per-user limit, you can turn on user notifications and set the percentage at which a user is emailed. Inside the product, `/cost` in Cowork shows approximate credit use, and Learn's SharePoint page (25 September 2026) says Copilot in SharePoint warns a user when 20 percent of the monthly limit remains.

**At the limit.** Access to the metered services stops until the monthly reset. Learn's monitoring page adds one exception: a task already running when the per-user limit is crossed can finish, and the excess is not counted or billed, at Microsoft's sole discretion.

**Requests.** Microsoft's FAQ says users on dedicated capacity who reach the limit are notified and can request more from the interface, and an admin approves or declines. Requests appear on the **Credit requests** page in Cost Management. The API reference (3 November 2026) says approving "records the decision but doesn't assign credits by itself", so an admin still adds the user to a policy or raises a limit. A custom request policy can redirect users to your own helpdesk form instead.

## Pay-as-you-go and the Copilot Credit pre-purchase plan

The billing method is separate from the limit: it decides which Azure subscription pays for whatever the policies allow. Microsoft describes two funding routes, and they are not alternatives.

- **Pay-as-you-go.** Usage is billed to the Azure subscription chosen as the billing method. Microsoft's FAQ says pay-as-you-go is the default, that customers are charged for actual usage, and that no minimum level of paid consumption is required.
- **Copilot Credit pre-purchase plan (P3).** Learn's setup page says P3 is not a separate billing option but a layer over pay-as-you-go: pre-purchase credits are used first, then usage continues on pay-as-you-go. It describes annual pre-purchase as discounted against pay-as-you-go rates. The Azure article (17 July 2026) gives the terms: a one-year term, automatic renewal by default, no cancellations or exchanges.

Where a tenant also holds prepaid capacity packs, Learn gives the order: capacity packs, then P3, then pay-as-you-go. Prepaid credits are not a cap. When they run out, usage continues on the meter, and only the spending policy limit stops it.

## Where to watch consumption

| View | Where | What it shows | Refresh |
|---|---|---|---|
| Overview tab | Copilot > Cost Management | Total credits used, prepaid against pay-as-you-go, active users, policies and users near their limits | Every 4 hours |
| Consumption tab | Copilot > Cost Management | Usage by spending policy, user, group, agent and service, with export | Every 2 hours |
| Cowork usage dashboard | Copilot > Cowork | Active users, tasks, retention and per-user detail | A "Last updated" time on the report |

The intervals come from Learn's monitoring page (1 October 2026). The same page notes that the Consumption tab counts users who consumed credits, not everyone a policy covers, and that an export is a point-in-time snapshot.

Reading does not require a role that can change policies. Message center post MC1470425 (10 September 2026) opened the consumption dashboards to AI Reader, Global Reader and License Administrator.

For the invoice side, Learn has a separate page on reading the same consumption on the Azure bill, and under CSP the charge arrives on your partner's invoice. Our [Microsoft 365 Copilot License Utilization and ROI Review](/services/microsoft-365-copilot-license-utilization-roi-review) reads seat usage and, where pay-as-you-go is on, Copilot Credits consumption, in one week for $1,950.

## A worked ceiling and a starting configuration for 20 to 300 people

At the default of 4,000 Copilot Credits per user per month, the ceiling is multiplication:

| Users covered | Monthly ceiling |
|---|---|
| 25 | 100,000 credits |
| 100 | 400,000 credits (Microsoft's own example) |
| 300 | 1,200,000 credits |

Microsoft's FAQ of 6 November 2026 gives 4,000 credits as "about $40 USD". That figure is Microsoft's, and a ceiling is not a forecast: billing is for actual usage. The FAQ adds that usage exceeds the default only if an admin changes the spending policy.

Our starting configuration for an organization of 20 to 300 people:

1. **One owner.** A named Global or Billing administrator confirms which Azure subscription pays, and stays on pay-as-you-go for the first month or two.
2. **A limited default policy.** Give the all-users policy a monthly limit and a per-user limit.
3. **One group policy per team with a defined use**, scoped to a security group, with no overlap between policies.
4. **Only the services in use**, with Auto-apply new services switched off.
5. **Alerts to two people**, one in IT and one in finance, plus user notifications.
6. **A weekly look at Overview** and a monthly read of Consumption by policy.

The opposite choices are right in two cases. Leave Auto-apply on if you want future services usable under the same cap without an admin step. Buy the pre-purchase plan once monthly use is steady, accepting a one-year purchase that cannot be canceled.

Our [Microsoft 365 Copilot Pay-as-You-Go Credits Setup](/services/microsoft-365-copilot-pay-as-you-go-setup) sets the billing method, default spending policy, limits and alert recipients with you, free for organizations that buy their Microsoft licensing through IT Partner.

## Frequently asked questions

### Is a spending policy limit a hard stop or only an alert?

The limit is the stop, and the alert is only a message. Microsoft Learn (30 October 2026) says users who hit a policy's monthly limit lose access to its agents and services until credits reset on the first of the month. The Cost Management API overview (3 November 2026) describes the email thresholds as notify-only.

### Can we set the limit to zero to switch usage-based billing off?

Microsoft's FAQ of 6 November 2026 says the Copilot Business default can be switched off by setting the spending limit to zero, in Partner Center or in the Microsoft 365 admin center. Learn's policy page asks for at least 2,000 credits where a per-user limit is set. Microsoft has not documented how the two fit together, so test the result with one user.

### Who can create and edit spending policies?

Learn's setup text gives turning billing on and choosing a billing method to the Global administrator and Billing administrator roles. AI administrator and License administrator can edit policies, limits and alerts. The Cost Management API overview (3 November 2026) says creating a policy also needs Billing or Global Administrator, and that Global, Billing and AI Administrators can approve credit requests.

### Does a spending policy also cap Copilot Studio agents?

Not automatically. Learn's cost planning page (26 October 2026) says Copilot Studio consumption is managed separately in the Power Platform admin center. Message center post MC1530368 (29 October 2026) says an administrator can choose to move an environment's cost control to Cost Management spending policies, with general availability by 20 November 2026.

### Where does the charge appear when we buy through a CSP partner?

Microsoft's FAQ says consumption charges under CSP flow through the partner's invoice to the customer, and that a customer admin cannot turn usage-based billing on unless the partner allows it. Learn's partner guidance (1 October 2026) requires the Azure subscription to be associated with the partner's billing account. The Copilot Credits remain your organization's own metered charges for what your users consumed.

## Sources

- [Managing AI experiences enabled by usage-based billing](https://learn.microsoft.com/en-us/microsoft-365/copilot/usage-based-billing-manage-copilot-credits) — Microsoft Learn, 2026-10-30
- [Set up usage-based billing for Copilot Credits](https://learn.microsoft.com/en-us/microsoft-365/copilot/usage-based-billing-copilot-credits-setup) — Microsoft Learn, 2026-10-30
- [Monitor Copilot Credit spending](https://learn.microsoft.com/en-us/microsoft-365/copilot/usage-based-billing-copilot-credits-monitor-spending) — Microsoft Learn, 2026-10-01
- [Usage-Based Billing and Cost Management for Copilot Credits](https://learn.microsoft.com/en-us/microsoft-365/copilot/usage-based-billing-overview-copilot-credits) — Microsoft Learn, 2026-10-30
- [Usage-based-billing guidance for CSPs, partner-managed customers, and MACC](https://learn.microsoft.com/en-us/microsoft-365/copilot/usage-based-billing-copilot-credits-csp-partner-macc) — Microsoft Learn, 2026-10-01
- [View Copilot Credit consumption in the Microsoft 365 admin center and on your Azure bill](https://learn.microsoft.com/en-us/microsoft-365/copilot/usage-based-billing-compare-dashboard-views) — Microsoft Learn, 2026-09-25
- [Optimize Copilot Credit costs with a pre-purchase plan](https://learn.microsoft.com/en-us/azure/cost-management-billing/reservations/copilot-credit-p3) — Microsoft Learn, 2026-07-17
- [Manage Copilot Cowork for your organization](https://learn.microsoft.com/en-us/microsoft-365/copilot/cowork/cowork-admin-governance) — Microsoft Learn, checked 2026-11-11
- [Copilot Cowork usage](https://learn.microsoft.com/en-us/microsoft-365/admin/activity-reports/cowork-usage-report) — Microsoft Learn, checked 2026-11-11
- [Get started with Copilot in SharePoint](https://learn.microsoft.com/en-us/sharepoint/copilot-in-sharepoint-get-started) — Microsoft Learn, 2026-09-25
- [Microsoft 365 Copilot Cost Management API overview](https://learn.microsoft.com/en-us/microsoft-365/copilot/extensibility/api/admin-settings/cost-management/overview) — Microsoft Learn, 2026-11-03
- [spendingPolicy resource type](https://learn.microsoft.com/en-us/microsoft-365/copilot/extensibility/api/admin-settings/cost-management/resources/spendingpolicy) — Microsoft Learn, 2026-10-27
- [creditRequest resource type](https://learn.microsoft.com/en-us/microsoft-365/copilot/extensibility/api/admin-settings/cost-management/resources/creditrequest) — Microsoft Learn, 2026-11-03
- [Plan licensing and cost for Microsoft 365 Copilot extensibility](https://learn.microsoft.com/en-us/microsoft-365/copilot/extensibility/cost-considerations) — Microsoft Learn, 2026-10-26
- [Microsoft Copilot Cost Management: September Updates (MC1470425)](https://admin.microsoft.com/Adminportal/Home#/MessageCenter/:/messages/MC1470425) — Microsoft 365 message center, 2026-09-10
- [Microsoft Copilot Studio cost controls are expanding to Cost Management in the Microsoft 365 admin center (MC1530368)](https://admin.microsoft.com/Adminportal/Home#/MessageCenter/:/messages/MC1530368) — Microsoft 365 message center, 2026-10-29
- [Microsoft 365 Copilot Chat: Set budget limits for "Pay-as-you-go billing" in Microsoft 365 admin center (MC1122160)](https://admin.microsoft.com/Adminportal/Home#/MessageCenter/:/messages/MC1122160) — Microsoft 365 message center, 2025-07-25
- [Usage-based billing for Microsoft Copilot Business licenses FAQ](https://aka.ms/UBBforSMB/FAQ) — Microsoft, updated 2026-11-06

## Key takeaways

- A spending policy decides who can use usage-billed Copilot services, which services, how many Copilot Credits they may consume in a month and which billing method pays; it is a limit, not a credit or an entitlement.
- Policies are created in the Microsoft 365 admin center under Copilot > Cost Management on the Configuration tab, with a monthly policy limit, an optional per-user limit, alert thresholds and a billing method.
- Policies do not stack: when several cover one user for the same service, the policy with the highest per-user limit applies in full, so a stricter policy added beside a looser one does not lower that user's cap.
- Reaching a policy limit stops access to the metered services until the reset on the first of the month, while alert emails only notify.
- The Overview tab in Cost Management refreshes every 4 hours and the Consumption tab every 2 hours, and AI Reader, Global Reader and License Administrator can read the consumption dashboards.
- At the default of 4,000 credits per user per month, 25 users have a ceiling of 100,000 credits a month, 100 users 400,000 and 300 users 1,200,000; Microsoft's FAQ gives 4,000 credits as about $40 USD.

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Want the limits, alert recipients and billing method set before the first Copilot Credits invoice? Our [Microsoft 365 Copilot Pay-as-You-Go Credits Setup](/services/microsoft-365-copilot-pay-as-you-go-setup) does it in one to two days and is free for organizations that buy their Microsoft licensing through IT Partner; the credits your users consume remain Microsoft's metered charge to you.