The Terraform Cloud Free Tier we knew is going away, but that doesn’t mean the concept of “free” is dead. It’s just… evolving.

If you’ve been relying on the legacy Free Tier like I have, you’ve probably already gotten the email or seen the upgrade notice. In my case, I was sitting comfortably on a plan with a 500 managed resource limit. It wasn’t huge, but it was enough for small-scale projects, quick experiments, or infrastructure tinkerers who like to keep things lean — and most importantly — free forever. But that’s changing.

Before we get started, let’s remember that this is for the Terraform Cloud Hosted Service NOT Terraform CLI aka Terraform Community Edition. That doesn’t have a free tier — it is free, period. So if you use that (like I do) with your own pipeline tool, Azure DevOps, GitHub Actions, GitLab, etc. This doesn’t apply to you at all. However, if you are interested in exploring what the HCP Terraform hosted service option might look like for you (especially if you want to rock Terraform Stacks— keep reading.

The New Free Tier: A Credit-Based Model

Instead of a hard, ongoing resource cap like before, new users now get onboarded to a Pay-As-You-Go plan that comes with a $500 credit. It’s similar to how Azure or GCP structure their free trials — more like a prepaid tab than an always-free sandbox.

This shift has pros and cons depending on how you use Terraform:

  • If you’re someone who runs tiny hobby projects or just wants to learn without ever spending a dime, this may feel like a downgrade. Once the $500 credit is gone, you either pay up or shut down.
  • On the other hand, if you’re evaluating Terraform Cloud seriously or want access to the full feature set without arbitrary limits, the credit-based system gives you the freedom to test everything at scale — at least for a while. No more hitting invisible walls because of a resource cap.

In other words, the new model isn’t for everyone, but it might actually be better for newcomers who want to explore the platform fully before committing financially.

What Happens If You’re on the Legacy Free Tier?

If you’re like me and still on the legacy free plan, you’ll be prompted to upgrade.

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When I edited my plan settings, I was presented with two options:

  1. Pay-As-You-Go
  2. Flex Contract

I don’t have a Flex Contract, so Pay-As-You-Go is really the only viable path forward.

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I go with the Pay-As-You-Go Plan.

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Pricing Under Pay-As-You-Go

Once you move off the legacy free plan and your $500 credit is used up, Terraform’s pricing kicks in. If you select the Essentials plan, the current rate is $0.10 per managed resource per month.

That might not sound like much — until you scale.

I saw a post on Reddit from a user (shoutout to notoriousbpg, awesome handle by the way) who was looking at a $15,000/year Terraform bill. He was comparing that to his AWS costs, which were just $8,000. I asked him how many resources he had — 13,000.

Let’s do the math:

13,000 resources * $0.10 = $1,300/month
$1,300 * 12 = $15,600/year

So yeah, that tracks.

Now, how is he still on the Free Tier with 13,000 resources? No idea. Maybe he got grandfathered in under older terms, or maybe something else is going on there. But for the rest of us, those days are over.

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Two Models, Two Personas

When you zoom out, what we’re seeing is Terraform pivoting its free offering to serve a different kind of user:

  • Old Free Tier: Designed for hobbyists, students, and lightweight usage that should stay free forever. Great for learning and low-stakes projects.
  • New Free Tier (via $500 credit): Aimed at serious evaluators who want access to every feature, no arbitrary limits — just a cap on cost.

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Both approaches make sense, but they cater to different personas. Unfortunately, if you’re in the “I want to play forever for free” camp, your time is limited. Once your legacy plan sunsets, you’ll have to start thinking about cost per resource — or move to self-hosted Terraform.

Conclusion

This change to HCP Terraform’s Free Tier is more than a pricing update. It’s a philosophical shift in how HashiCorp is inviting new users into their ecosystem. The $500 credit isn’t a bad deal if you plan to kick the tires and see what HCP can do at scale. But if you’ve been happily living within the limits of the legacy Free Tier, this could be a frustrating change.

As for me? I’ve been rockign Terraform Stacks on a Pay-as-you-go-Plan and been paying roughly $20 a month. Not bad for all the cool stuff I am working on.

So as the old saying goes… The Free Tier is Dead! Long Live the Free Tier!!!

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