Credit cards offer numerous perks, including exclusive discounts and privileges, like paying in installments. These credit card installment plans usually come with low or no interest, longer repayment periods, and equal monthly payments. Most banks in the Philippines even offer a payment term of your choice to sweeten the deal.
But is it really a good idea to avail a credit card installment plan? Should you really be extending your credit card payment and staying in debt longer? When is credit card installment beneficial?
In this article, we’ll answer all your burning questions about credit card installment, as well as discuss its pros and cons before you avail it for your next purchase.
What is a Credit Card Installment Plan?
A credit card installment plan is a scheme to pay for purchases in equal amounts monthly. Instead of making a one-time cash payment or a straight payment with your credit card, you pay an equal month for a certain number of months.
You can choose to pay in fixed payment terms of three, six, 12, or 24 months. This allows you to divide the entire purchase amount depending on your preferred installment term.
A credit card installment plan is not the same with Buy Now, Pay Later (BNPL), though. BNPL is a feature of some credit cards where you can choose to defer your payment for up to 90 days.
How Does Credit Card Installment Plan Work?
A credit card installment plan is a popular payment option for those who may not have enough money to pay for their purchases in cash. For instance, you need a new inverter refrigerator that costs PHP 25,000 but you don’t have enough cash to make an outright purchase. You can charge it to your credit card and pay it in installment by choosing a payment term that works for your budget.
The merchant will swipe your credit card and set up the installment payment scheme. Before completing the transaction, the merchant will inform you of your monthly payment amount. Once you agree to the payment terms, the transaction will be confirmed and the purchase will be processed.
What Can You Buy On a Credit Card Installment Plan?
One of the most attractive features of credit cards is the credit card installment plan that allows you to buy items that cost a bit of money through split payments. You can purchase home appliances, furniture, and gadgets and pay it in affordable installments.
Moreover, you can make a straight charge on your credit card to purchase plane tickets, for example, and convert it into affordable monthly installments.
What are the Pros of Credit Card Installment Plans?
There are many credit card installment benefits. Here are just some of them.
Buy Expensive Items
Credit card installment allows you to buy big-ticket items, like kitchen appliances and furniture, without draining your cash flow. The goal is to save your cash on hand and spread out your payments in three to 24 months. So if you’re going to buy a new phone that costs PHP 50,000, you’ll pay PHP 4,168 every month for 12 months.
By opting for a credit card installment, the partner merchant can process everything for you. All you have to do is wait for the first installment to be posted on your billing statement and pay it on or before the due date.
Use Your Cash for Other Purposes
Cash is king, so it’s good to have it readily available for any financial emergencies. Without cash, you’d be tempted to borrow money even with high interest and fees.
Availing credit card installment plans can help you leave your cash untouched. With this available cash, you can use it for business or other more urgent expenses.
Earn Rewards Points
Although not all credit cards let you earn points from installment plans, most still allow you to rack up points for direct or installment purchases. Before heading to the store, call your credit card provider and confirm if your installment purchase can qualify for their regular points generation program.
Enjoy Deferred Payments
Instead of saving up for several months just to purchase something, you can simply avail a credit card installment with payment terms that you can afford.
Banks also offer the Buy Now, Pay Later option which lets you purchase something now and pay your first installment after three months. This means you’ll have 90 days to pay for the item you bought.
Buy Now, Pay Later also allows you to avail great deals that are only offered for a limited period and pay for it at a later date.
Secure Shopping Experience
Shopping with a credit card poses a lower risk when it gets lost or stolen compared with carrying a large amount of cash to pay for a big purchase. There’s a slim chance of retrieving cash lost. But unauthorized purchases on your credit card can be investigated and reversed.
No Need for a Down Payment
Unlike installment plans offered by lending companies where you have to pay an initial amount of up to 20% of the purchase price, credit card installment plans don’t need you to make any down payment.
What are the Cons of Credit Card Installment Plans?
If there's a good side, there's also a bad side to credit card installment plans. Keep these in mind:
No Rewards for Installment Purchases
Depending on the credit card, most issuers don’t allow you to earn points with installment purchases. If you’re a reward-seeker, then credit card installment plans probably won’t be your thing. After all, availing one implies that your credit card’s bank will shoulder the full expense. So you basically owe the bank for the purchase. Why would they reward you for that? Sadly, you can’t have your cake and eat it, too. Consider this when you’re thinking of going this route.
Another Monthly Payment to Worry About
Another thing to consider when availing credit card installment plans is your ability to juggle monthly payments. Don’t risk it if you think you’re not ready for it. Consider the number of bills you’re currently paying. Utility bills will always be up there, and you probably have internet and phone bills to worry about as well. Can you afford to worry about another set of monthly bills?
Your Financial Future is Uncertain
Nobody knows what the future holds. You can’t predict the next emergencies that can hinder you from paying your installments. This may include medical expenses, unemployment, or bad business profits, among others. If you’re not that confident about your financial capacity one month from now, then avoid availing credit card installment plans for a while.
Purchase Can Become More Expensive
Although credit cards offer 0% interest on installment plans, there are instances when you still need to pay processing fees and interest. Some stores even offer different pricing for cash or straight purchases against installment purchases. Credit card issuers may also charge early processing fees if you opt to pay your installment charges before the end of its term.
What are the Best Credit Card Installment Plans?
Most credit card issuers in the Philippines offer credit card installment plans with different terms and conditions. Here are a few of the best credit card installment plans that you can consider for your next purchase.
HSBC Credit Card
Use your HSBC credit card to purchase big-ticket items at 0% interest for up to 36 months. No need to pay for additional costs―HSBC does not charge interest. But there’s a minimum spend requirement to avail the installment plan depending on the merchant.
For example, if you’re buying at Abenson, HSBC allows split payments on the following conditions:
Use your HSBC credit card to purchase big-ticket items at 0% interest for up to 36 months.[1] No need to pay for additional costs―HSBC does not charge interest. But there’s a minimum spend requirement to avail the installment plan depending on the merchant.
For example, if you’re buying at Abenson, HSBC allows split payments on the following conditions:
- 3 and 6 months installment = minimum purchase of PHP 3,000
- 12 months installment = minimum purchase of PHP 6,000
- 24 months installment = minimum purchase of PHP 18,000
Read more: What is the Perfect HSBC Credit Card for You?
BPI Credit Card
Avail light payment terms when you shop online with any BPI credit card. Participating merchants in the BPI Special Online Installment Plan[2] include Power Mac Center, Anson’s, Abenson, Call to Deliver, Shop SM, Henry’s Cameras, Trunc, Insular Health Care, and Ergo.
Avail light payment terms when you shop online with any BPI credit card. Participating merchants in the BPI Special Online Installment Plan include Power Mac Center, Anson’s, Abenson, Call to Deliver, Shop SM, Henry’s Cameras, Trunc, Insular Health Care, and Ergo.
Just visit the shop’s online store, select your item and add it to your cart, and then proceed to payment.
On the payment screen, choose from different payment options before being redirected to their payment gateway. For example, if you’re shopping at Power Mac Online, you’ll need to click the Paynamics option. And if you’re shopping at ShopSM, you’ll need to click on the iPay88 Online Payment button.
Note: BPI also lets qualified BPI credit cardholders use the Bonus Madness Limit. This is a bonus installment credit limit of up to 100% of the regular credit card limit.
Related: BPI Credit Card Promo Offers: Check Out These Shopping, Lifestyle, and Travel Deals
Metrobank Credit Card
Just like the previously mentioned credit card installment plans, Metrobank’s credit card installment plan[3] works the same way. However, it also lets you enjoy more perks, like getting a chance to win PHP 1 Million worth of SM gift cards.[4]
RCBC Credit Card
If you’re looking for a credit card installment plan that doesn’t require any minimum spend, then use your RCBC credit card.
RCBC offers UNLI 0% and UNLI Installment[5] options where you don’t need to meet a minimum spend and there’s no limit to the number of times you can avail it. Moreover, you can convert all your overseas purchases, too.
RCBC’s processing fees range from PHP 100 to PHP 250, depending on the channel used to convert the purchases into installments.
Read more: 15 Exciting RCBC Credit Card Promos You Shouldn’t Miss in 2021
How Do You Apply for a Credit Card Installment Plan?
Applying for credit card installment is easy because partner merchants can automatically convert your purchase into split payments of your choice. However, for other types of installment promos, you may reach out to your bank to request an installment plan.
To make sure you can avail a credit card installment plan, check that you:
- Have no outstanding or unpaid balances
- Did not max out your credit limit
- Have enough credit card balance to cover the purchase amount
- Can pay the monthly charges
- Agree to the terms and conditions and paying all related costs and charges
Final Thoughts
Just like most things in life, availing credit card installment plans comes with its own set of pros and cons. The challenge now is to determine how you can use it to your advantage.
If you can earn from your cash on hand, then maybe avail a credit card installment plan for your purchase instead. However, if you think your sources of income are unstable, then you may not want to take the risk and just pay in cash.
Weigh all your options and consider all possible scenarios before you avail an installment plan. In fact, this should apply to any financial decision you’ll make.
If you don't have a credit card yet, check out our credit card application guides for a speedy application process!
This article was first published in The Manila Times on Sept. 19, 2020.
Sources:
- [1] Card Instalment Plan (HSBC, 2021)
- [2] Online Special Installment Plan (BPI, 2021)
- [3] Metrobank Credit Card Promotions (Metrobank, 2021)
- [4] Tap with your Mastercard and win big at The SM Store
- [5] Unli 0% and Unli Installment (RCBC, 2021)
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