if they are giving away free credits or trails then it sure does hurt, just few days back one of the vps provider stopped their free trail only because of abuse.. and said they have more free trial user than 3 times of actual paying users

It depends on much money a user costs. For example, if give them $X amount of AI credits for free on signup, for every free user you lose money until they pay for a plan. But if you app has minimal cost per user, then it doesn't hurt much.

That's why people say to not have free plans, because free users consume resources and are less likely to become paid users.