Wouldn't that negate the value that they get from the services, such that their overall balance becomes $0?

I'd expect a charge (at least) slightly less than $250 in such a case so that there's a win-win situation for both.

They probably don't have a hard limit at $250, and even if they do, it is often useful to get extra money from folks who are getting incredible customer surplus from you (e.g. big companies, well-paid professionals, etc) and just ignore people who don't (students, startups, etc).