How to Control AI API Costs
API cost = rate × volume × behavior. Control all three and the bill becomes predictable. Here are the levers, in order of impact.
Lever 1 — Right-size the model
Frontier models cost multiples of compact ones for the same task. Route hard tasks to frontier, everything else to compact.
Lever 2 — Cache stable prefixes
Providers discount repeated input tokens. Stable system prompts and tool definitions hit cache discounts on every turn.
Lever 3 — Trim context
Long-context calls are the most expensive shape. Summarize history, cap tool outputs, drop dead weight.
Lever 4 — Stop the loops
A velocity limit kills retry loops — the single biggest multiplier on API spend.
Lever 5 — Enforce the budget
Per-agent ceilings make the budget a decision, not a hope. The firewall enforces; the audit log measures.
At a glance
| Lever | Controls |
|---|---|
| Model selection | Rate per token |
| Caching | Repeated input cost |
| Context trimming | Tokens per call |
| Velocity limits | Retry multiplier |
| Ceilings | Total budget |
FAQ
What's the biggest lever?
Model selection changes per-token economics; velocity limits stop the volume multiplier. Both beat rate shopping.
Is there a free way to start?
Yes — model right-sizing and caching are free. The firewall's MIT core self-hosts free.
Related
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